The Deposit Insurance Corporation (LPS), which protects bank savings, is drafting a plan to implement risk-based pricing of premiums paid by clients so as to make its services more sustainable.
The move follows the ballooning capital injection to save Bank Century, now renamed Bank Mutiara. The bailout funds, disbursed between Nov. 24, 2008 and July 24, 2009, cost LPS a total of Rp 6.76 trillion.
The LPS acted on behalf of the government, which considered the collapse of Century would represent systemic threat to the banking sector which was affected by the global crisis.
“Our premium pricing is currently flat, we are preparing for a risk-based pricing mechanism, but that will take time,” LPS CEO Firdaus Djaelani said Thursday.
As of Dec. 31, LPS managed Rp 14 trillion in total assets. Its clients include 124 commercial banks, 1,792 rural banks (BPRs) and 131 sharia banks. The banks currently pay twice a year 0.1 percent of the value of their total savings as premiums to LPS in order to obtain coverage.
The plan to change the premium pricing mechanism, Firdaus said, was also prompted by the government’s decision in October last year to raise the ceiling for LPS coverage of individual bank accounts from Rp 100 million to Rp 2 billion, given the global banking crisis.
Firdaus said the risk-based pricing mechanism would factor in the performance of a specific bank relative to its type and size.
“We have made a simulation [on the risk-based pricing mechanism], but we need to discuss it with the banks,” he said.
“The customers must also be educated so there will be no misunderstanding. The fear is that if a bank’s premium payment is raised, its customers may consider withdrawing their money. We do not want this.”
Firdaus said he would further discuss the plan with Bank Indonesia (BI) as the supervisor and regulator of the banking sector prior to proposing it to the House of Representatives as the plan would require an amendment to the 2004 Law on the LPS.
BI director of banking research and regulation Halim Alamsyah said the move would benefit the banking industry. “I think we will give it support,” he said.
Harry Azhar Aziz, a member of House Commission XI overseeing financial affairs, also supported the plan, but insisted the risk calculation should include variables such as profiles of bank managers and shareholders.
“There are those who still think that they can commit financial crimes through banks such as what happened in Bank Century,” he said.
