Higher Premiums For Banks With Lower
Ratings : LPS
A differential premium system (DPS)
imposed by deposit insurance corporations on banks and other financial institutions encourages beter risk management, and expert has claimed. According to the
deposit insurance corporation’s (LPS) executive chairman, Kartika “Tiko”
Wirjoatdmodjo, the implementation of a
DPS would eventually help ensure the stability of the country’s financial
system. “Banks that have a low rating on our soundness scale, due to their
high risk of failure and poor management, will
be charged higher premiums compared to those that score better ratings,” he said on Friday on the sidelines of the
Third International Workshop on Intergrated Protection Scheme held by the
agency in Nusa Dua, Bali.“That will
motivate them to improve their management systems and their ratings in
order to avoid paying high premiums. It will benefit us as well because it will enhance our financial stability,”
he added. The LPS hopes to introduces a DPS this year to replace the current system that imposes an annual
o.2 percent premium equally on all banks on their average thirdparty funds.
Under the new system, the annual rate
will be set at between 0.1 percent and 0.3 percent, depending on each
bank’s rating. It has prepared five
rating levels, which are calculated using three indicators – a bank’s own
financial ratios; a bank soundness assessment evaluated by the Financial
Services Authority’s (OJK); and the bank’s compliance with LPS regulations.
The
annual rate will stand at 0.1 percent for banks with
a rating of 1, 0.15 percent for a 2 rating, 0.2 percent for a 3 rating, 0.25
percent for a 4 rating, and 0.3 percent for a rating of 5. According to Tiko there are about 10 commercial lenders
in the country that qualify for a 5 rating. At the moment, the LPS only
covers saving or deposits up to a maximum of Rp 2 billion (US$ 176,113) for
each Indonesian Depositor. It requires
banks to charge a maximum of 7.5 percent interest rate for deposits in rupiah,
1.5 percent for deposits in foreign currencies and 10 percent for deposits in
rural banks (BPR). Its insurance members
comprise 109 commercial banks, 11 sharia banks and around 1,700 BPRs. The
total of insured deposits in commercial and sharia banks amounted to Rp 2.11
quadrillion as of December 2013, equal to 147.63 million accounts. No data is
currently available on the BPR’s deposits. Meanwhile, Yee Ming Lee, the general
manager for policy and International division at the Perbadanan Insurans
Deposit Malaysia (PDIM), which is
Malaysia’s deposit insurance corporation, said that Malaysian lenders had been coming to the agency, looking for
assistance to improve their risk management system. The PDIM has set its annual premium rates from 0.05 percent to 0.4
Percent, established the deposit protection limit at 250,000 ringgits
($76,233) per depositor, and divides lenders into four rating levels. Currently there are 27 commercial banks and
21 islamic banks operating in the country. Lee said that banks might need to
invest more in information technology and internal control to assist them
with improvments in their risk-management systems.
Formula
Tenses :
1.
Other financial institutions encourages
beter risk management.
Simple present tense ( S + V1 (s/es) + O )
Simple present tense ( S + V1 (s/es) + O )
2.
Expert has claimed.
Present perfect tense (S + Have /Has + V3 +O +Adv. Of time)
Present perfect tense (S + Have /Has + V3 +O +Adv. Of time)
3. The implementation of a DPS would
eventually help ensure the stability of the country’sfinancial system.
Simple present tense ( S + V1 + O)
Simple present tense ( S + V1 + O)
4.
He
said on Friday on the sidelines of the Third International.
Simple Past Tense ( S + V2 + O+Adv. Of time)
Simple Past Tense ( S + V2 + O+Adv. Of time)
5.
That will motivate them to improve their
management systems.
Simple future ( S + Will + V1 + O)
Simple future ( S + Will + V1 + O)
6.
It will benefit us as well.
Simple future ( S + Will + V1 + O)
Simple future ( S + Will + V1 + O)
7.
It
will enhance our financial stability.
Simple future ( S + Will + V1 + O)
Simple future ( S + Will + V1 + O)
8.
he added.
Simple past tense ( S + V2 + O )
Simple past tense ( S + V2 + O )
9.
The LPS hopes to introduces a DPS this
year.
Simple present tense ( S + V1 (s/es) + O )
Simple present tense ( S + V1 (s/es) + O )
10.
Current system that imposes an annual o.2
percent premium equally on all banks on their average thirdparty funds.
Simple present tense ( S + V1 (s/es)
+ O )
11.
The
annual rate will be set at between 0.1 percent and 0.3 percent
Simple future ( S + Will + V1 + O)
12.
It has prepared five rating levels.
Present perfect tense ( S + Have/has + V3 + O)
Present perfect tense ( S + Have/has + V3 + O)
13.
The annual rate will stand at 0.1 percent
for banks.
Simple future ( S + Will + V1 + O)
Simple future ( S + Will + V1 + O)
14.
It requires banks to charge a maximum of
7.5 percent interest rate for deposits in rupiah
Simple present tense ( S + V1 (s/es) + O )
Simple present tense ( S + V1 (s/es) + O )
15.
Its insurance members comprise 109
commercial banks.
Simple present tense ( S + V1 + O )
Simple present tense ( S + V1 + O )
16.
Which is Malaysia’s deposit insurance.
Simple present tense ( S + V1 + O )
Simple present tense ( S + V1 + O )
17.
Malaysian lenders had been coming to the
agency.
Past perfect continous tense ( S +
Had+ been + Ving + O)
18.
The PDIM has set its annual premium rates
from 0.05 percent to 0.4 Percent.
Present perfect tense ( S + Have /
has + V3 + O)
19.
Currently there are 27 commercial banks
and 21 islamic banks operating in the country.
Simple
present continous tense ( S + To be
(Is/am/are) + Ving + O )
20.
Lee said that banks might need to invest
more in information technology.
Simple
Past Tense ( S + V2 + O+Adv. Of time)
