Reuters logo
3 months ago
Fitch Assigns Lembaga Penjamin Simpanan First-Time 'AAA(idn)' Rating; Outlook Stable
May 8, 2017 / 10:32 AM / 3 months ago

Fitch Assigns Lembaga Penjamin Simpanan First-Time 'AAA(idn)' Rating; Outlook Stable

12 Min Read

(The following statement was released by the rating agency) JAKARTA, May 08 (Fitch) Fitch Ratings Indonesia has assigned Lembaga Penjamin Simpanan (LPS) a National Long-Term Rating of 'AAA(idn)' with Stable Outlook. 'AAA(idn)' National Ratings denote the highest rating assigned by the agency in its National Rating scale for Indonesia. This rating is assigned to issuers or obligations with the lowest expectation of default risk relative to all other issuers or obligations in the same country. LPS's ratings reflect its high strategic importance in safeguarding stability and confidence in Indonesia's financial system, as well as a strong legal framework for government support in the form of capital and potential liquidity assistance. Therefore, Fitch classifies LPS as a public-sector entity that is credit linked to and equalised with the Indonesia sovereign. KEY RATING DRIVERS Legal Status "Stronger": LPS was established by the government as an independent entity with authorised capital from the Ministry of Finance (MoF). Legally, LPS can only be liquidated by revocation of the LPS law of 2004 and privatisation is not possible. Law Number 24 of 2004 also contains legal frameworks for the government to cover LPS's capital deficit. Fitch believes such frameworks indicate a strong commitment from the government to ensure LPS's going concern. Control "Mid-Range": LPS's role is clearly defined and the company must operate in accordance with the relevant LPS laws. LPS is directly responsible only to the Indonesian president, although other government stakeholders also oversee the company's strategic direction. This is reflected in the composition of LPS's board of commissioners, half of which are representatives of the MoF, Financial Services Authority and Bank Indonesia. Strategic Importance "Stronger": In conjunction with other government agencies, LPS plays an irreplaceable policy role as the sole operator of the deposit insurance scheme and the execution platform of ensuring the orderly resolution of systemic and non-systemic failed banks. Fitch believes a default of LPS could trigger detrimental consequences to the public confidence of Indonesia's financial system and would lead to a systemic risk. Hence, this attribute has been given a greater weight towards the assessment of LPS's rating. Integration "Mid-Range": LPS's budget is not consolidated into the MoF and the company does not receive ongoing government funding. However, under the LPS Law of 2004, LPS is stipulated to have a minimum capital of IDR4 trillion, below which the government is obliged to recapitalise LPS from state assets, subject to House of Representatives approval. Moreover, LPS may obtain government loans under certain criteria for liquidity needs. High Liquidity: LPS has high liquidity, as it can only invest in Bank Indonesia Certificates (SBI) and government securities (SBN). Around 2.3% of LPS's total assets at end-2016 were held as cash and 96.9% were invested in government securities; some of this relates to the investment of insurance reserves. Moreover, LPS does not have any financial debt. RATING SENSITIVITIES A weakening of LPS's strategic importance or support may trigger a downgrade. Also, a significant reduction in insurance reserves without authorisation by the government to increase insurance premiums could result in a downgrade, as it would indicate a potential lack of support in maintaining a sound financial profile. Contact: Primary Analyst Iwan Wisaksana Director +62 21 2988 6807 PT Fitch Ratings Indonesia DBS Bank Tower, 24th Floor, Suite 2403 JI. Prof. Dr. Satrio Kav. 3-5 Jakarta 12940 Indonesia Committee Chairperson Vladmir Redkin Senior Director +7 495 956 2405 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(idn)' for National ratings in Indonesia. Specific letter grades are not therefore internationally comparable. Additional information is available on www.fitchratings.com Applicable Criteria International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016) here National Scale Ratings Criteria (pub. 07 Mar 2017) here Rating of Public-Sector Entities – Outside the United States (pub. 22 Feb 2016) here Additional Disclosures Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below