LPS in Brief

I. Organizational Overview

IDIC has established by Law No. 24 Year 2004. Based on the law, IDIC has two function, insured customer’s deposit and actively participate to maintain banking stability. IDIC role not only pay box but also as a loss minimizer through lower cost test analyisis to decide wheather the failed bank can be rescued or liquidated. IDIC is an independen institution whose responsible to President. Total members IDIC Board are six persons. Three persons come from ex-officio Central Bank, Ministry of Finance and Financial Service Authority. Board members appointed by President as recommendation from Minister of Finance. Nowdays, total employee IDIC aproximately 220 person. IDIC implement flat rate of premium amounting to 0,1% per semester from average total deposit per month based on data deposit last semester (ex ante). In the event liquidation, IDIC has to pay eligible’s deposit maximum 90 working days from the date of bank’s license revoked.
All banks who operate in Indonesia obliged to following IDIC insurance scheme. Now, number of bank in Indonesia amounting to 1.945 banks (120 commercial banks and 1.845 rural banks). Since IDIC has been operate (22 September 2005) until now, IDIC paid insurance claim to 65 liquidated bank (64 rural banks and 1 commercial bank). Beside that, IDIC rescued the systemic risk failed bank has decided by Financial System Stability Committee (Ministry of Finance as a coordinator and Governor of Central bank as a member). IDIC insured customer deposit until USD220 thousands per customer per bank. For maintaining financial system stability, in 2012, IDIC, Ministry of Finance, Central Bank and Financial Service Authority have signed Memorandum of Understanding regarding changing of data/information for financial safety net.    

II. Unique Features

IDIC apply IDIC’s rate as a one of three criterias to determine customer’s deposit is eligible to pay or not. If customer get interest rate more than IDIC’s rate, so that customer’s deposit not eligible to pay by IDIC (principal and interest)..
 
III. Major Challenges

In FSA law, IDIC has new power to examine problem banks before the bank is failed. Examination by IDIC to problem bank is done for conducting IDIC ‘s task and function. Examination power is not gived by IDIC Law. Because of that, IDIC need to enhance its capacity and capability in order to do new power, bank examination.