Now, Fund Settlement of Capital Market Transaction Done via Central Bank

Entering the end of the first half of 2015, Indonesian Central Securities Depository (KSEI) successfully completed one of its infrastructure developments in the form of capital market funds transaction settlement facility through the central bank (Bank of Indonesia or “BI”). The implementation of this facility was marked by the launching of its implementation and the award of its charter to the Custodian Bank, today (29/6), in the Main Hall, Gallery of Indonesia Stock Exchange.

The launching of this implementation was attended by the capital market and banking industry officials , among others the Deputy Governor of BI, Ronald Waas and the Board of Directors of Bank of Indonesia, as well as Deputy Commissioner of Capital Market Supervisory II, Financial Services Authority (FSA) , M. Noor Rachman, , Indonesia Stock Exchange Board of Directors , Indonesian Clearing and Guarantee Corporation Board of Directors , KSEI Board of Directors and Commissioners , and representatives of the Custodian Banks as well as capital market associations.

Prior to this application, the funds transaction settlement i n the Indonesia capital market by KSEI ’s Account Holder s (Securities Company and Custodian Bank) was done through Payment Bank in cooperation with KSE I. Th is cooperation was established due to KSEI’s status as a non-banking institutions which unable to perform the funds transfer function, especially for transactions related to the receipt and payment of funds to the Service User. It is also part of the requirements of funds placement in the bank’s special account which was regulated by Bapepam-LK ’s Regulation No.III.C.6. All funds recorded in the Securities Account of Account Holder will be placed by KSEI at the Payment Bank in a specific current account.

With the launching of funds transaction settlement facility in the capital market through the central bank, the transfer of funds can be conducted at the Bank Payment and Real Time Gross Settlement System (BI - RTGS) of Bank of Indonesia. This facility enables KSEI ’s Account Holders to perform easier and faster funds settlement, since it uses a more centralized central banking system. In t he first phase of this implementation, all Custodian Bank s must conduct fund s settlement using the BI - RTGS system for all transactions denominated in Rupiah. In the future , all KSEI’s Account Holder s, both Custodian Bank and Securities Company , will conduct the funds settlement using BI-RTGS system for all transactions denominated in Rupiah.

The implementation of BI - R TGS system has been effective since June 18th, 2015, by 20 Custodian Banks simultaneously. The implementation of this facility is a follow up of the Addendum Agreement on the Use of BI - RTGS system between KSEI and Bank of Indonesia which was signed on May 28 th , 2015. Among the reason s for the implementation of such facility through the central bank is to meet the requirements of the International Organization of Securities Commissions (IOSCO), an association which governs the international regulations for the capital market. Principle No. 9 regarding funds settlement regulate s that the financial market institutions should conduct the funds settlement using a current account at the central bank. The goal is to mitigate credit risk and liquidity risk of the funds settlement.

From: KSEI


I'm Burhan Turnip, an investment junkie based in Jakarta, Indonesia. This is my take on writing Indonesia investor blog. Let's break down investing topics in Indonesia. Get in touch with me via burhanturnip [at] gmail [dot] com

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