Press Release

The U.S. Supports Protection of Bank Deposits in Indonesia

Jakarta | Monday, October 03, 2005

U.S. Ambassador B. Lynn Pascoe and Indonesian Minister of Finance Yusuf Anwar inaugurated the Deposit Insurance Agency (LPS) today, with Ambassador Pascoe handing over new Information Technology equipment for LPS operations. “The launch of LPS marks an exciting stage in U.S –Indonesia partnership that will improve financial sector safety and soundness, and thereby contribute to stability and economic growth in Indonesia,” stated U.S. Ambassador Pascoe.

The U.S. Government, through the U.S. Agency for International Development (USAID), is assisting the Government of Indonesia to implement the Deposit Insurance Law that will progressively reduce the “blanket guarantee” on bank deposits, but will ensure that the majority of Indonesians’ deposits are protected. The blanket guarantee will be rolled-back over 18 months. After March 2007, deposits will be insured up to Rp100 million, and at this level, 95% of all depositors will be fully protected.

LPS is assisting the Indonesian government to create a modern deposit insurance system that will form part of Indonesia’s social safety net, which is critical to the future safety and soundness of the banking system. USAID has been assisting Indonesia in this effort by helping to establish the LPS through policy, organizational and operational advice, training on international best practices, public relations, and the provision of IT equipment.

The LPS will collect and manage the deposit insurance premiums that will be paid by all licensed banks, and it will oversee bank rehabilitation, or closure, in the event of failure. The LPS will protect depositors, monitor and address risks to deposit insurance funds, and limit the impact of potential bank failures. .

The USAID LPS project is a $3.6 million, 30-month activity that represents the U.S.’s continued commitment to Indonesia’s economic growth and prosperity. The program is part of USAID/Indonesia’s current US$750 million, five-year strategy to strengthen democratic and decentralized governance, improve the quality of basic education, support the delivery of higher quality basic human services, and to create growth, jobs and prosperity.