Indonesia widens deposit insurer's role in banking system

It will assist in supervising banks under 'intensive supervision' status.

Indonesia has expanded the Deposit Insurance Corporation’s (LPS) role in overseeing cash-strapped banks under a new regulation in order to bolster the defences against pandemic-bought financial risks, reports Reuters.

Under the new decree, the LPS is allowed to assist the Financial Services Authority (OJK) in supervising a bank after OJK puts the bank under an “intensive supervision” status.

The LPS is allowed to pump cash into such a bank to help the lender handle a liquidity or solvability problem. The decree was signed by the president on 7 July and was made public on 9 July.

It also allows LPS to raise cash through several means, including using its holdings of government bonds in repurchase transactions with the central bank, outright sale of such bonds to the central bank, issuing its own rupiah or foreign currency bonds and, if necessary, borrowing from the government.

Since March, the country has been making changes in its crisis to prevent the current slump from creeping into the financial system.

Here's more from Reuters.