Membership and Fund Guarantee Amount

Oct 13, 2025 by talynt.org 18 views

Deposit Guarantees for Bank Customers: A Review of the Blanket Guarantee and the Possibility of its Replacement with the Deposit Guarantee Institute (LPS)

Introduction

The banking crisis that hit Indonesia in the past gave birth to great concern, especially the loss of public trust in the banking system. To restore this confidence, the government implemented the blanket guarantee program. This program guarantees all national banks' obligations, proven to be effective in restoring public and creditor confidence in the banking system. This trust can be seen from the return of funds to the banking system and the smoothness of the payment process for banks that are liquidated in 1998 and 1999. All third-party fund obligations (DPK) from the liquidated banks are also completed appropriately and regularly. In addition, this program also has a positive impact on improving the performance and activities of national banking business.

However, behind the success of Blanket Guarantee, this program also caused new problems, namely moral hazard. Roccipi Analysis (Role, Opportunity, Communication, Capacity, Interest, Process, and Ideology) shows that Moral hazard occurs both in commercial banks that often do not comply with the principle of caution in bank management, or to the National Banking Retirement Agency (BPPN) which has weaknesses in their status, function, and position.

The Need for a Deposit Guarantee Institution (LPS)

To overcome the problem of moral hazard and increasing the stability of the banking system, it is necessary to consider the replacement of the blanket guarantee with the Deposit Guarantee Institute (LPS). The ideal LPS model for the condition of the Indonesian macroeconomic and banking economy currently has several main characteristics:

Institutional Aspects

LPS Ideally is an independent public legal entity, on the basis of its establishment based on the Law. This is important to ensure LPS independence and accountability in carrying out their duties.

Membership Aspects

LPS Membership is mandatory for all banks that are Indonesian legal entities, including foreign bank branch offices. This ensures that all banks operating in Indonesia are included in the deposit guarantee system.

Fund Guarantee Amount

The amount of funds guaranteed can be determined based on per capita GRDP, for example around Rp. 25 million to Rp. 50 million, or based on the number of customer accounts, for example Rp. 100 million.

Risk-Based Premiums

This system considers the risk profile of each bank and provides premiums that are proportional to the risks.

Effective Handling of Troubled Banks

This authority is important to ensure effective handling of banks that experience difficulties and to minimize losses for customers.

Support and Implementation Strategy

Based on legal and financial analysis, as well as other supporting factors, Bank Indonesia (BI) can play a role in the establishment of LPS by making capital participation. To support this plan, BI needs to conduct in-depth studies and complete the exit strategy regarding divestment in legal entities and other bodies that are not relevant to Article 64 of the BI Law.

In addition, to support the effectiveness of LPS, it is necessary to prepare an independent bank rating agency, increase the risk-based supervision system (risk-based supervision), and encourage banks to adjust to international banking provisions.

Conclusion

The replacement of the Program Blanket Guarantee with LPS is a strategic step to increase the stability of the Indonesian banking system. Independent LPS, professional, and have broad authority will be able to guarantee the security of customer deposits, reduce the risk of moral hazard, and increase public confidence in the banking system. LPS implementation requires full support from various parties, including BI, banking regulator, and banking itself.

Recommendations

Establishment of LPS: The government should establish LPS as an independent public legal entity, with the authority to guarantee customer deposits and manage troubled banks.
Membership and Fund Guarantee Amount: LPS membership should be mandatory for all banks operating in Indonesia, and the fund guarantee amount should be determined based on per capita GRDP or the number of customer accounts.
Risk-Based Premiums: The system should consider the risk profile of each bank and provide premiums that are proportional to the risks.
Effective Handling of Troubled Banks: LPS should have the authority to effectively handle banks that experience difficulties and minimize losses for customers.
Support and Implementation Strategy: BI should play a role in the establishment of LPS by making capital participation, and conduct in-depth studies and complete the exit strategy regarding divestment in legal entities and other bodies that are not relevant to Article 64 of the BI Law.
Independent Bank Rating Agency: An independent bank rating agency should be prepared to support the effectiveness of LPS.
Risk-Based Supervision: The risk-based supervision system should be increased to support the effectiveness of LPS.
International Banking Provisions: Banks should be encouraged to adjust to international banking provisions to support the effectiveness of LPS.

By implementing these recommendations, the government can increase the stability of the Indonesian banking system, guarantee the security of customer deposits, reduce the risk of moral hazard, and increase public confidence in the banking system.
Deposit Guarantees for Bank Customers: A Review of the Blanket Guarantee and the Possibility of its Replacement with the Deposit Guarantee Institute (LPS) - Q&A

Introduction

The banking crisis that hit Indonesia in the past gave birth to great concern, especially the loss of public trust in the banking system. To restore this confidence, the government implemented the blanket guarantee program. This program guarantees all national banks' obligations, proven to be effective in restoring public and creditor confidence in the banking system. However, behind the success of Blanket Guarantee, this program also caused new problems, namely moral hazard. In this article, we will review the provisions of the Blanket Guarantee and the possibility of its replacement with the Deposit Guarantee Institute (LPS).

Q&A

Q: What is the Blanket Guarantee program?

A: The Blanket Guarantee program is a government program that guarantees all national banks' obligations, proven to be effective in restoring public and creditor confidence in the banking system.

Q: What are the benefits of the Blanket Guarantee program?

A: The benefits of the Blanket Guarantee program include the return of funds to the banking system, the smoothness of the payment process for banks that are liquidated, and the completion of all third-party fund obligations (DPK) from the liquidated banks.

Q: What are the drawbacks of the Blanket Guarantee program?

A: The drawbacks of the Blanket Guarantee program include the occurrence of moral hazard, which occurs both in commercial banks that often do not comply with the principle of caution in bank management, or to the National Banking Retirement Agency (BPPN) which has weaknesses in their status, function, and position.

Q: What is the Deposit Guarantee Institute (LPS)?

A: The Deposit Guarantee Institute (LPS) is a proposed institution that will guarantee customer deposits and manage troubled banks.

Q: What are the characteristics of the ideal LPS model?

A: The ideal LPS model has several main characteristics, including:

Institutional aspects: LPS Ideally is an independent public legal entity, on the basis of its establishment based on the Law.
Membership aspects: LPS Membership is mandatory for all banks that are Indonesian legal entities, including foreign bank branch offices.
Fund guarantee amount: The amount of funds guaranteed can be determined based on per capita GRDP, for example around Rp. 25 million to Rp. 50 million, or based on the number of customer accounts, for example Rp. 100 million.
Risk-based premiums: This system considers the risk profile of each bank and provides premiums that are proportional to the risks.
Effective handling of troubled banks: This authority is important to ensure effective handling of banks that experience difficulties and to minimize losses for customers.

Q: What is the role of Bank Indonesia (BI) in the establishment of LPS?

A: Bank Indonesia (BI) can play a role in the establishment of LPS by making capital participation, conducting in-depth studies, and completing the exit strategy regarding divestment in legal entities and other bodies that are not relevant to Article 64 of the BI Law.

Q: What are the benefits of replacing the Blanket Guarantee program with LPS?

A: The benefits of replacing the Blanket Guarantee program with LPS include:

Increased stability of the Indonesian banking system
Guarantee of the security of customer deposits
Reduction of the risk of moral hazard
Increase of public confidence in the banking system

Q: What are the challenges of implementing LPS?

A: The challenges of implementing LPS include:

Establishing an independent public legal entity
Ensuring the mandatory membership of all banks operating in Indonesia
Determining the fund guarantee amount
Implementing a risk-based premium system
Ensuring effective handling of troubled banks