Starting in 2025, banks must pay premiums for the restructuring program
Starting next year, in addition to paying deposit insurance premiums, banking institutions will also be required to pay premiums for the Banking Restructuring Program (PRP) to the Deposit Insurance Corporation (LPS).
This obligation stems from the mandate of the Law on Financial Sector Development and Strengthening (P2SK), Government Regulation No. 34 of 2023 regarding the Premium Portion for Funding the Banking Restructuring Program, as well as LPS Regulation No. 1 of 2024 concerning the Banking Restructuring Program (PRP) Premium.
Dian Ediana Rae, the Executive Head of Banking Supervision at the Financial Services Authority (OJK), stated that the implementation of the PRP premium aims to build a more robust financial system and provide better resilience for banks in facing the worst risks arising from a financial system crisis.
"One of the funding sources for the PRP comes from the contribution of the banking industry, through the mandatory payment of the PRP premium as stipulated in Article 39 paragraph (4) of Law No. 9/2016, which has been amended by the P2SK Law," Dian explained in a written statement last week.
If there is an economic downturn that impacts the health of a bank, that bank can use the PRP funds to address or resolve its problems.
Dian added that the process of drafting regulations regarding the PRP premium has been underway since 2016, involving the banking industry and banking associations.
Banks have already obtained sufficient information and understanding, so they should be prepared to fulfill the PRP premium payment obligation, which will begin to be implemented in 2025.
"The PRP premium amount is determined by the level of risk and asset value," Dian clarified. The higher the asset value and risk level faced by a bank, the greater the premium it must pay.
The purpose of this policy is to encourage banks to continuously strive to maintain their risk levels at an optimal position (more prudent).
Conversely, for banks with a risk level of 5 (unhealthy), the PRP premium charged is 0 percent, regardless of their total assets. "Thus, banks facing problems will not be burdened by the PRP premium payment obligation," Dian concluded.
