Definition of liabilities of Bank Management

Liabilities MANAGEMENT BANK
A. Definition of liabilities of Bank Management

Management of bank liabilities or liability of the bank management is a process whereby the banks trying to develop sources of funds through non-traditional loans in the money market or by issuing debt instruments to be used primarily for the benefit of credit demand.

B. Management Concept liabilities

Liabilities management, in principle, can be divided into 2 types namely the concept of liability reserve position management and loan liability management position.
Reserve liability management position

In meeting the liquidity needs of short-term according to this concept can be done through loans from the money market. Furthermore this concept allows the bank has a ratio of productive assets is a little less liquid so as to increase bank profits.

Weaknesses concept Reserve liability management position include:

1. the uncertainties about the cost to provide backup or relatively illiquid assets

2. possible unavailability of funds in financial markets which led to higher interest rates drastically

Figure 6.4-B will show in terms of management strategy to balance the bank balance after the withdrawal of deposits.

Loan Liability Management Position

Loan liability management position aims to increase the number of productive assets for a profit. Requirements to adopt this concept is the availability of liquid financial market with enough participants, and with adequate funds in which a bank can not influence market interest rates.

Figure 1.1 shows the increase in credit financed by borrowing money from the money market.

Figure 1.1 Forms Management liabilities
A. Basic concepts of Bank Balance Sheet

- Reserve Primary

- Backup secondary

- Investments


- Savings

- Capital

- Credit
B. Reserve Position Liability Management


C. Loan Positioning Liability Management

- Reserve Primary

- Backup secondary

- Credit



- Savings

- Capital

- Investments

C. Management Target liabilities

Liabilities management is very important in the management of bank funds for the main reasons as follows:

a. to minimize the cost of bank interest

b. the importance of relationships with customers

c. to counterbalance the rules in the field of monetary and banking.

Liabilities management targets can be seen in Figure 1.2






Figure: 1.2

Bank Interest Cost minimizing

The ability of a bank's interest in minimizing the cost of this will obviously influence the cost of funds are concerned. The factors that cause a group of borrowers are not sensitive to interest rates, among others:

Z indifference

Z lack of competition

Z the cost of purchasing a minimum

Z transaction costs

Z other factors such as politics, policies, services, incentives and trust.

The main problem in the interest rate sensitivity analysis is the bank's ability to perform customer segmentation or grouping based on changes in interest rates.

Importance of good relations with customers

As one of the factors why the bank's liabilities to the management side is to be able to meet the needs / requests of credit primarily by customers who are large companies. Customers are often classified as major customers (prime customers). Good relationship between banks with major clients is very important for banks and should be placed on a high priority. Benefits to be gained from this relationship in addition to the high spreads that can be generated from the credits.

The next things that need to be strengthened with the bank regarding the customer relationship is the factor share provider and offers complete banking services, fast and precise needs.
Offset rules

Restrictions on deposit interest rates will cause the bank can not attract all the funds offered primarily on the period of high interest rates. Restricted deposit interest rate will result in distortions and inefficient. Reserve shall in principle constitute an additional cost for the banks. The higher provision shall reserve the greater the additional costs.

Liabilities position

Liabilities consist of several main headings, in which each outposts in liabilities explain obligations (liabilities) both short-and long-term, and post capital (equity). Respective functions such liabilities are as follows:

Liabilities and equity side (liabilities) reflects the bank's balance sheet fund collection activities originating from various sources. Bank funds basically come from the public or third parties and the bank's own capital (equity). The order of the post balance sheet liabilities side is according to the format stipulated by Bank Indonesia as follows:

1. Giro

This heading consists of checking the rupiah and foreign currency belonging to third parties, which are stored in the bank and all branches both inside and outside the country. Current accounts can be withdrawn by check, transfer and other pay warrant.

Giro is the withdrawal of savings can be made at any time by using checks, giro bilyet, other means of payment orders or with the entry. Giro consists of checking account customers and other bank checking accounts.

Demand Deposits Demand Deposits or sometimes called a savings account Cheking that can be used as a means of payment and withdrawal can be done at any time by using checks, other means of command or entry way. Because of the nature of withdrawal can be done any time, then the gyro is a source of funds for banks is very unstable. For the customer's checking account with these properties will be very helpful and a means of payment more efficient. Therefore, this checking account are generally owned by clients that require payment to be more efficient in speeding up its business activities. Each owner has a current account (given) checkbook and bilyet giro as instruments to make withdrawals of funds and payment of a transaction. Checks can be used for a payment in cash transactions, checks can be drawn on the fiat or on behalf of and can not be canceled by the puller unless the check is listed as missing or stolen with missing evidenced by reports from the police. Check on the principle of unconditional order to pay a certain amount of money during delivery. According KUHD paragraph 205 "of each check must be paid on the day of his appointment even though the check presented for payment before the day is called segabai day / date of issue". The next time the grace period for payment shown on the check is 70 days from the date of its withdrawal.

While bilyet gyro is basically a command to the bank to transfer a certain amount of money bukukan the burden of fetching account on the date specified to the party listed on the warkat bilyet giro. Bilyet giro can not be withdrawn in cash but can only transfer. Bilyet giro payment orders are not unconditional, but payment will only be made in accordance with the effective date of expiration. Besides giro bilyet be canceled unilaterally pulling accompanied by pembatalannya reasons.

In the checking account, the bank provides the so-called reward checking services. GIRO services are of interest given by banks to the edge of the gironya balance. Tingak rates are relatively smaller compared with other deposits. Savings and current accounts is not actually a savings to get the flowers but simply used as a means to smooth business transactions. Therefore, savings deposits are widely used by the perngusaha who have activities that require payment in check form. For banks, these deposits is a source of low-cost funds but because of its withdrawal, the bank should really be following the withdrawal behavior of customers who in turn will affect the pattern of bank liquidity management.

Calculation of giro services each bank uses a different way. The derivation of commonly used services bank deposits among other things, based on daily balance and average balance per month. The derivation is highly dependent on bank management policies are concerned. Provision of services is usually limited to checking the amount of the minimum balance set by the bank. For example giro balances up to USD 5 Million diberkan no checking services. The greater the number of current accounts balance the greater the percentage of deposits are given.

Calculation of interest to determine the gyro services can be done by using a single rate system and the system of compound interest or the story. The system determines the interest rates with a single menggukana system is relatively simple because it uses one type of interest rates. While the system is more varied story interest and is calculated based on the provision of each service rate gyro for each of the balance of current accounts.

2. Another immediate obligation

That is the immediate obligation to pay, among others to the central government or the office of the State Treasury and Cash, interbank transfers, interbank call money and foreign currency travelers checks that have been sold. Included in this post is for money, a coupon that is due and all other obligations that term less than 15 days, such as call money.

3. Savings

Is the withdrawal of savings can only be done under certain conditions agreed upon but can not be withdrawn by check and bilyet giro. It consists of postal savings rupiah and foreign currency non-bank third property, which is stored in the bank and all branches both inside and outside the country.

Savings products currently varies widely after pakto 27, 1988. This happens because the banks are given the freedom to conduct their own savings. Besides the intense competition between banks in raising money through savings mobilization caused banks to create the kind of forced savings programs in addition to the more varied and interest rates are quite attractive prizes. The cost of funds derived from these savings can be classified as relatively expensive funds. Higher than giro service but less than the combined deposits. Combined calculation of these savings fund sources can be done based on the daily balance, average balance or the lowest balance of the savings.

Customers who want to take advantage of these savings in addition to the facility has a current account should also open a savings account at the same bank. This facility enables customers to enjoy higher rates of interest earned on savings accounts while still utilizing gironya. The mechanism of this product is done by every customer to be included as deposits deposits to savings accounts, while at the customer's interest or bilyet giro check and balance if it is found insufficient, then the respective bank can transfer from savings to checking account customers who previously had memberika authorizes the bank to transfer from savings accounts to checking accounts as needed to satisfy the lack of withdrawal.

4. Deposits

Is the withdrawal of savings can only be done at a certain time by agreement with the depository bank customers. This heading consists of time deposits, deposits on call, certificates of deposit and other similar deposits, which are stored in the bank and all branches both inside and outside the country. These deposits in rupiah and in the foreign exchange owned by third parties that withdrawal can be done by a certain time period in accordance with the agreement between the bank with customers.

This funding source has a key feature of the period is fixed, therefore, often referred to as fixed deposits generally have a maturity period of 1 month, 3 months, 6 months, 12 months, 24 months. These deposits can be withdrawn only at maturity by the party whose name is listed in bilyet deposits. Therefore, the savings deposits in the name. Further deposits are withdrawn by the depositors before the expiration period as has been agreed, the bank wearing a penalty to the rights of depositors and interest income are not counted by the bank for these deposits. To ease customers in the extension of time deposits, the bank provides the facility period giving automatic or automated rollover. An extension is valid for new deposits. To make it easier and profitable customers, depositors usually open savings accounts for example, savings in the bank concerned. And so on until the depositors decided to extend the deposit again. But for banks that want the interest transferred to another account and the interest is not taken, then the deposit rates may increase the principal amount of customer deposits.

Side bank, the source of funds is deposits of funds are classified as expensive compared to other funding sources. But profits for the bank is providing liquidity to the needs of these withdrawals can be predicted almost as accurately. These types of deposits as preferred by customers because they offer interest rates relatively higher than the deposits.

The amount of interest should be reduced still applicable income taxes for the final 15%.

5. Certificate of Deposit

Is the savings in the form of certificates of deposits transferable evidence of storage or deposit certificates of deposit sertificate is a proof-term deposit savings can be bought and sold. Form of savings is not so popular among the banks. Therefore, the banking funds sourced from this type of smaller amounts than other funding sources. These savings banks require permission in advance from the BI to banks that will issue certificates of deposit. But since pakto 27, 1998 that any bank can issue a certificate of deposit as an instrument association funds without permission from the BI, simply by telling it.

Characteristics of the certificates of deposit are as follows:

(Published by fiat in the bank specified time.

(Can be traded.

(It is a money market instruments.

(Interest paid in advance.

(Can be used as collateral.

6. Securities issued

Type liabilities position in this post are securities issued by banks that caused the obligation to pay for the banks in question both in rupiah and foreign currencies. Issued securities may include debt pengkuan letter or promissory note, money orders, and bonds.

7. Loans Received

Is all the loans received by banks including the Central Bank liabilities in the form of liquidity credit, discount facilities, and loans from other banks. In the world of banking cooperation are common in various forms such as providing assistance in the form of expert assistance (consultant) or in the form of working capital / capital. Financial aid is typically given as a course in the sense pinjamai short term, and medium-term. (For a maximum period of 7 days we call the call money, while those without a time limit in the sense that every moment can be captured by the first notice we call deposits on call. Loan borrowing is a common provision of bank loans into banks kua relatively weaker , such as government banks to the National Private Banks or foreign banks to the National Private Bank.

8. Subordinated Debt

Is obtained loans from related parties or from banks and other parties who meet certain requirements, such as the withdrawal period requirements / reimbursement in accordance with the provisions of Bank Indonesia

9. Other liabilities

This heading teridiri from other liabilities account balances, both in rupiah and foreign currencies that can not be incorporated into other posts. An example is the interest to be paid, tax bills and other obligations.

10. Capital

Equity or own capital also called consisting of:

™ for the bank's paid up capital of the Indonesian legal entities, in the form of capital or principal and compulsory deposits (for cooperatives) who actually had paid, namely the difference between the capital with a capital base that has not been paid. Capital in deposit for foreign bank branches, a net fund the headquarters and branch offices abroad. Net Fund is a difference between the balance of investment and the central office or branch offices abroad in branch offices in Indonesia with Kantar-investment balance of branch offices in Indonesia.

™ agio shares, in the form of excess capital deposits received by banks as a result of the stock price melibihi nominal value.

™ reserves, reserves of which is formed from the allowance for profit or net profit after deducting taxes, and owner approval or general meeting of shareholders meeting Arau founding member of the provisions or articles of association of each bank.

™ Capital contributions, capital contributions from other parties.

™ Difference in the financial statements

™ Difference in revaluation of fixed assets, the difference between the actual value of fixed assets and the value that has been recorded.

™ Profit-loss securities Unrealized

™ other comprehensive income

Capital Bank as a number of funds invested in various types of business (venture) the relevant banking. The bank's capital consists of own capital is sometimes referred to as "equity capital" (equity capital) is the investment made by the limited company of a bank. Whereas the second group is the senior capital (senior capital) is the bank's capital obtained from sale of bonds (bonds) and preferred stock (preferred stock): bonds were the papers term debt of more than a year and a particular interest simplex issued by private banks or state banks. The second is the preferred stock is stock that gives many the right to receive dividends or the profits which are distributed by banks and the property at the time of the dissolution of the corporation in advance of the ordinary shares.