T

he Financial Services Authority (OJK) officially launched the long-awaited Global Master Repurchase Agreement (GMRA) Indonesia on Friday, aiming to standardize repurchase or repo transaction agreements.

A repo transaction agreement is a securities sale-and-purchase contract with a pledge to repurchase or resell the securities at an agreed time and price.

OJK commissioner for capital market supervision Nurhaida said on Friday that the rapid development of repo transactions, including problems in their implementation, had led the regulators to draw up the GMRA Indonesia, which set a basic requirement for the transaction agreements, back in 2010.

The deliberation was carried out by the government with assistance from the Asian Development Bank.

'€œVarious parties can accept GMRA as the deliberation takes into account local prevailing laws through the country'€™s annex insertion,'€ she said during the launch at the Indonesia Stock Exchange building in South Jakarta.

The GMRA Indonesia adopts standard GMRA provisions, issued by the International Capital Market Association (ICMA). The government, which included Bapepam-LK as the capital market regulator at the time, Bank Indonesia (BI) and the Finance Ministry'€™s financing and risk management office (DJPPR), had adjusted provisions in the GMRA according to Indonesia'€™s laws and repo parties'€™ needs.

Provisions in GMRA Indonesia include an obligation on the repo parties to incorporate compulsory articles about underlying securities, transfer-of-ownership, margin maintenance and default procedures into their transaction agreements.

The obligation to apply GMRA Indonesia has been stipulated in OJK Regulation No. 9/2015, which states that the implementation will take effect on Jan. 1.

Nurhaida said that currently her office had discussions about the possibility of issuing an accounting standard for repo transactions with the Financial Accounting Standard Board.

The OJK also talked with the Finance Ministry about '€œcertain tax treatments'€ for repo transactions.

'€œTax incentives will boost repo transactions,'€ she said. However, she declined to detail the proposed incentives.

OJK chairman Muliaman D. Hadad said on Friday that the total annual volume of repo transactions during the period of 2011-2015 amounted to 150.2 trillion at the highest with a transaction value of Rp 136.8 trillion (US$9.97 billion).

In the 2006-2011 period, the highest repo transaction volume was recorded at 42.6 trillion, worth Rp 35.78 trillion.

BI senior deputy governor Mirza Adityaswara expressed hope that the interbank repo transaction value after GMRA Indonesia'€™s implementation could be higher than the current approximately Rp 800 billion per day.

'€œThe comparison is interbank money market transactions, whose value amounts to Rp 10 trillion daily,'€ he said, adding that lenders should have alternative funding sources other than deposits and could also place their liquidity excess among them instead of at the central bank.

During the event, private lender BCA and state-run lenders Bank Mandiri, BNI and BRI also signed their repo transaction agreements, all of which apply GMRA Indonesia standards.

BCA president director Jahja Setiaatmadja stated that GMRA Indonesia would make the repo transaction process more efficient.

'€œThis [standardized agreement] means transactions can be quickly closed [by the parties]. No need to wait for a long time [to process the transactions],'€ he said.