LEMBAGA PENJAMINAN SIMPANAN

Summary

This video explains the role of Lembaga Penjaminan Simpanan (LPS) in Indonesia's banking system, established after the 1997-1998 financial crisis. LPS insures deposits to maintain public confidence in banks and safeguards financial stability. The video outlines LPS's key functions, such as compensating depositors, resolving failing banks, and its involvement in crisis management as part of the Financial System Stability Committee (JPSK). It also compares Indonesia's 'Paybox Plus' model with other global deposit insurance systems. The discussion emphasizes LPS's crucial role in preventing systemic financial crises and ensuring economic stability.

Takeaways

• 😀 LPS (Lembaga Penjamin Simpanan) was established in response to the 1997-98 financial crisis to protect public trust in banks and prevent widespread panic about bank failures.
• 😀 LPS guarantees deposits to maintain financial stability and prevent systemic collapse in the banking sector, and it is part of the broader Financial Safety Net (JPSK) system.
• 😀 The primary function of LPS is to guarantee savings, but it also plays a crucial role in resolving failing banks and managing financial crises.
• 😀 During the 1997-98 crisis, the government initially implemented a blanket guarantee, which proved to have moral hazard risks, leading to the creation of LPS.
• 😀 LPS operates independently but is accountable to the President of Indonesia. It officially began operations in 2005.
• 😀 LPS plays a proactive role in crisis management, working with institutions like Bank Indonesia, OJK, and the Ministry of Finance to prevent financial contagion.
• 😀 The LPS guarantees up to a certain amount (around 100 million IDR per depositor) and has procedures for assessing whether claims are valid, including verifying deposits within 90 days.
• 😀 There are different models for deposit guarantee schemes worldwide. Indonesia uses the 'Paybox Plus' model, which not only pays claims but also assists in bank resolutions.
• 😀 LPS is actively involved in the resolution of troubled banks, either through restructuring or liquidation, and works to minimize systemic risks.
• 😀 In cases of systemic financial instability, LPS may use methods like 'Purchase and Assumption', 'Bridge Banks', or 'Temporary Capital Injection' to stabilize the financial system and protect public savings.

Q & A

What was the main reason for the establishment of LPS?

LPS was established in response to the 1997-1998 financial crisis, where many banks collapsed, and public trust in the banking system plummeted. The government introduced a blanket guarantee, which eventually led to the creation of LPS to provide a more sustainable and controlled deposit insurance system.

What was the 'blanket guarantee' introduced during the 1997-1998 crisis?

The 'blanket guarantee' was a government program that promised to cover 100% of all deposits in banks, regardless of the amount, to restore public trust during the crisis. However, this system created moral hazards, as banks became more careless with their financial management.

How does LPS differ from the 'blanket guarantee' system?

Unlike the blanket guarantee, LPS operates with specific limits and conditions. It guarantees a certain amount of deposits but does not cover everything, and it also plays an active role in rescuing or resolving problematic banks to prevent systemic collapse.

What is the primary role of LPS?

The primary role of LPS is to guarantee the savings of bank customers in case of bank failure. It also works to maintain financial system stability and assists in policy-making when banks are in trouble.

What is JPSK, and what role does LPS play in it?

JPSK (Jaring Pengaman Sistem Keuangan) is a financial safety net team consisting of multiple institutions, including Bank Indonesia, OJK, the Ministry of Finance, and LPS. LPS plays a role in ensuring the protection of depositors' funds and assists in resolving troubled banks to prevent financial contagion.

What is the Paybox model, and which countries use it?

The Paybox model is the simplest form of deposit insurance, where the institution only compensates depositors in case of bank failure without being involved in rescuing or overseeing troubled banks. Countries like Australia, Germany, and Hong Kong use this model.

How does the Paybox Plus model differ from the Paybox model?

The Paybox Plus model not only compensates depositors but also has the authority to take limited actions in rescuing failing banks, such as restructuring or liquidation. Countries like Canada, France, and Japan implement this model.

What is the 'loss minimizer' model in deposit insurance?

The 'loss minimizer' model involves institutions actively intervening in the resolution of failing banks to minimize losses. This model is usually combined with early-stage monitoring and regulation, and countries like Russia and Spain apply it.

What happens if a bank fails and its failure is deemed systemic?

When a bank failure is considered systemic, meaning it poses a risk to the entire financial system, a coordinated response from OJK, Bank Indonesia, the Ministry of Finance, and LPS is required. The bank may be handed over to LPS for resolution through various strategies like purchase and assumption or setting up a bridge bank.

What steps does LPS take to handle claims from depositors after a bank's operational license is revoked?

When a bank's operational license is revoked, LPS verifies the deposits within 90 days and then pays out claims according to the established criteria. This process involves checking the legitimacy of claims, including ensuring no fraudulent activities or excessive interest rates were involved.