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OJK launches bullion bank regulation as global gold demand soars
Analysts say bullion banks can help Indonesia safeguard its foreign exchange reserves amid geopolitical uncertainty, enhance the stability of its currency and reduce reliance on the US dollar.
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An official of state-owned pawnshop operator PT Pegadaian shows small gold bars minted by state-owned diversified miner PT Aneka Tambang (Antam) in Jakarta on May 20, 2024. (Antara/Rivan Awal Lingga)
T
he Financial Services Authority (OJK) has introduced a regulation allowing financial institutions to establish bullion banks to offer gold-related services for saving, financing, trading and depositing.
According to the OJK, the initiative will boost domestic gold investment and strengthen the national economy, as the raw material is both mined and processed domestically.
Analysts say bullion banks can strengthen Indonesian central bank reserves and enhance confidence in the stability of the rupiah by enabling Bank Indonesia to use the precious metal for intervention in the foreign exchange market, if necessary, while reducing reliance on the United States dollar.
They also forecast that global gold prices will continue to rise, driven by increasing demand from various countries amid geopolitical uncertainty.
OJK Regulation No. 17/2024, issued on Oct. 18, outlines the requirements for establishing a bullion bank, including minimum core capital of Rp 14 trillion. Regional banks and microfinance institutions are excluded from offering such services.
The regulation implements stipulations on gold-related services introduced with Law No. 4/2023 on the development and strengthening of the financial sector, a broad omnibus law issued last year.
A bullion bank can collect gold from individuals through deposits and then lend or trade it with other parties, much like the way a regular bank operates with cash.
