Bank of Indonesia has greater powers to act

New regulations means that authorities in Indonesia have the power to avert a US style credit crisis.

In Indonesia, the government holds the major share of financial assets and given this very strong hold on the economy, the Indonesian central bank has the power to bail out leading financial institutions such as banks and insurance companies meaning that action can be taken quickly.

This government decree is to anticipate any financial crisis and provide legal basis for the government to act. Central Bank Governor Boediono said that the move was “urgent” but it would allow the country to anticipate and avert any economic trauma.

The authorities in Indonesia have spent 450 trillion rupiah thus far bailing out lenders in the Asian financial crisis over the last ten years and this new ruling will continue to allow this movement of funding liquidity.

The move is partly as a response to prior experiences as Indonesia was hard hit by the 1997-98 crisis, when dictator President Suharto was ridiculed for the appalling handling of the financial meltdown so authorities were determined that it would not happen again.

So far losses are around 5 percent as the rupiah fell almost 1 percent to 9,860 per dollar and Indonesian stocks dropped 3.76 percent today.

Story link: Bank of Indonesia has greater powers to act