Lecture Notes Central Banking Program Magister Akuntansi Universitas Trisakti Lecture Notes Central Banking (Chapter 12, Peter Rose)

What is a central bank? The most important financial institution in a modern economy, it has a strategic role in managing the economy through monetary sector A central bank is a government agency that monitors the operation of its financial system and controls the growth of the nation’s money supply. Central banks are “bankers’ banks.” They communicate with commercial banks and securities dealers in carrying out their essential public policy functions. A public institution, protecting public interests Bank for money circulation Monetary authority 2 Sejalan dengan evolusi fungsinya, peran BS dalam perekonomian semakin penting, seperti tercermin dari peningkatan jumlah BS di dunia, jika s/d th. 1950 terdapat 59 BS, maka pada tahun 1990 meningkat menjadi 161 BS

Evolution of central bank 3 Peran bank sentral di berbagai negara bermula dari bank sirkulasi dan kemudian mengalami evolusi hingga menjadi bank sentral yang modern dgn tujuan yang lebih fokus dan independen ......... Bank Sirkulasi & Bankers bank Bank Sentral (awal) Bank Sentral (dewasa ini) Bank umum (komersial) yang berfungsi sbg bank sirkulasi (mencetak dan mengedarkan uang) Juga sbg banker’s bank (lender of last resort). Peran dlm pengendalian moneter, perbankan, dan sistem pembayaran mulai dituntut Masih berperan ganda sbg bank komersial. Sebagai bagian dari Pemerintah, termasuk pembiayaan fiskal dan program Pemerintah. Tujuan jamak (inflasi, nilai tukar, pertumbuhan, lapangan kerja, neraca pembayaran) Tujuan tunggal, yaitu stabilitas harga (dan nilai tukar) Fokus pada tiga tugas: pengendalian moneter, pengawasan bank, dan penyelenggara sistem pembayaran. Independen dari Pemerintah dgn suatu mekanisme koordinasi. Tuntutan penguatan akuntabilitas dan transparansi. Sejalan dengan evolusi fungsinya, peran BS dalam perekonomian semakin penting, seperti tercermin dari peningkatan jumlah BS di dunia, jika s/d th. 1950 terdapat 59 BS, maka pada tahun 1990 meningkat menjadi 161 BS

Evolution of central bank Evolusi peran bank sentral banyak dipengaruhi oleh perkembangan ekonomi dan keuangan, tatanan sosial dan politik, serta pandangan dari sisi teori ekonomi ......... 4 Bank Sirkulasi & Banker’s bank Bank Sentral (awal) Bank Sentral (dewasa ini) Perlunya pertumbuhan pasca Perang Dunia. Financial repression & gov’t lead development Bretton wood & Intern’l trade focus Globalization & financial liberalization Cross-border capital flows & crises Pentingnya disiplin dan fokus keb. ekonomi Industrial revolution & merchantilism. Emergence of banking and payment system Ekonomi - Keuangan Classical economic thoughts of Adam Smith, Fisher, Keyness, Ricardo, Casel, etc. on growth, money, prices, interest, exchange rates etc. Macroeconomic (output) stabilization policy. Debat Klasik vs. Keynes Mundell-Fleming utk ekonomi terbuka. Structural adjustment policies (First generation reforms) Neo-classical synthesis: LR money neutrality & SR Phillips curve  inflation focus of monetary policy. Rational expectation & Real business cycle  transparency, komitmen, credibility Good governance (Second generation reforms) Pandangan Teori Perkembangan BS juga tidak terlepas dari pengaruh teori ekonomi serta perkembangan ekonomi-keuangan dan sosial politik. Perkembangan teori rational expectation (ratex), time consistency dan business cycle mendorong kebijakan yang dilakukan lebih transparan, komitmen yang tinggi dan harus kredibel. Inflation targeting framework (ITF) yang merupakan kerangka kebijakan moneter dengan menetapkan inflasi sebagai sasaran akhir mengacu kepada prinsip-prinsip tersebut. Banyak negara mengaadopsi ITF akhir-akhir ini. Colonialism from the West, strugle for and emergence of independence in the East. Democratization in the West, but not in the East Nationalism & “catching up” from the East Democratization movements from the West, “spill-over” to the East. Sosial- Politik

The role of central bank in the economy Control of money supply to avoid severe inflation – to maintain price stability Maintain price stability thru (aggregate) demand management by controlling money supply and or interest rates. Price stability is a necessary condition to sustain economic growth Stabilizing financial markets – money and capital markets Fostering development of financial markets Ensuring a stable flow of funds through those markets Lender of the last resort - for financial institutions squeezed by severe liquidity pressures when alternative source of funds have dried up. Supervisor of the banking system Providing and improving payments system - a smoothly functioning and efficient payments mechanism is vital for business and commerce Helping Interbank Clearing and settlement system Money circulation – providing supply of currency and coins

Central bank and its functions in several countries Not all central banks have the three functions: 1)monetary authority, 2)banking regulator, and 3) provider of payment services. But every central bank has at least its monetary function.

Channels through which Central Banks work Central banks affect the economy as a whole through managing market interest rates and banks’ reserves which in turn lead to: Changes in the cost of and availability of credit to business, consumers, and government Changes in the volume and rate of growth of the money supply Changes in the financial wealth of investors as reflected in the market value of their stocks, bonds, and other security holdings Changes in the relative prices of domestic and foreign currencies (exchange rates) Changes in the public’s expectations regarding future money and credit conditions and currency values.

Channels through which Central Banks work Cost & availability of credit Size & growth of the money supply Market value of the public’s security holdings Currency exchange rates Public expectations regarding security prices, interest rates, currency prices, money supply & credit availability Volume & growth of borrowing & spending by the public on domestic & foreign consumer & capital goods & services Market interest rates Level & growth of reserves in the banking system Policy tools of the central bank Economic goals: A stable price level and low inflation Sustainable economic growth Maximum employment

Pioneering central banks Bank of England (the oldest central bank) Bank of England Act 1694 The most recent legislation is the Bank of England Act 1998 which established the arrangements for the Bank’s current monetary policy responsibilities. Under the 1998 Act, the Banking Supervision function that had previously been undertaken by the Bank was transferred to the newly formed Financial Services Authority. The goal is to maintain a stable and efficient monetary and financial framework as its contribution to a healthy economy. There are two core purposes of BOE, which are monetary stability and financial stability. 9 Perkembangan BS juga tidak terlepas dari pengaruh teori ekonomi serta perkembangan ekonomi-keuangan dan sosial politik. Perkembangan teori rational expectation (ratex), time consistency dan business cycle mendorong kebijakan yang dilakukan lebih transparan, komitmen yang tinggi dan harus kredibel. Inflation targeting framework (ITF) yang merupakan kerangka kebijakan moneter dengan menetapkan inflasi sebagai sasaran akhir mengacu kepada prinsip-prinsip tersebut. Banyak negara mengaadopsi ITF akhir-akhir ini.

World Leading Central Banks 10 Perkembangan BS juga tidak terlepas dari pengaruh teori ekonomi serta perkembangan ekonomi-keuangan dan sosial politik. Perkembangan teori rational expectation (ratex), time consistency dan business cycle mendorong kebijakan yang dilakukan lebih transparan, komitmen yang tinggi dan harus kredibel. Inflation targeting framework (ITF) yang merupakan kerangka kebijakan moneter dengan menetapkan inflasi sebagai sasaran akhir mengacu kepada prinsip-prinsip tersebut. Banyak negara mengaadopsi ITF akhir-akhir ini.

World Leading Central Banks The Federal Reserve System On December 23, 1913, the Federal Reserve System, which serves as the nation's central bank, was created by an act of Congress The Federal Reserve’s duties fall into four general areas: - Conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates - Supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers - Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets - Providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system 11 Perkembangan BS juga tidak terlepas dari pengaruh teori ekonomi serta perkembangan ekonomi-keuangan dan sosial politik. Perkembangan teori rational expectation (ratex), time consistency dan business cycle mendorong kebijakan yang dilakukan lebih transparan, komitmen yang tinggi dan harus kredibel. Inflation targeting framework (ITF) yang merupakan kerangka kebijakan moneter dengan menetapkan inflasi sebagai sasaran akhir mengacu kepada prinsip-prinsip tersebut. Banyak negara mengaadopsi ITF akhir-akhir ini.

(7 members appointed by the president) The Federal Reserve System Board of Governors (7 members appointed by the president) 12 Federal Reserve banks & 25 branch banks (reserve bank presidents appointed by Board of Governors) Supervise Federal Open Market Committee (12 voting members) Serve 3,200 member banks of the system Supervise Manager of the System Open Market Account Supervise

The Federal Reserve System

The Federal Reserve System In principle, the Board of Governors is independent of both legislative and executive branches of the federal government. This independence is supported by terms of office much longer than the president’s (up to 14 years), and by the fact that the Fed is self-supporting. When the Federal Open Market Committee (FOMC) has reached a consensus on the appropriate future course for monetary policy, a directive is given to the manager of the System Open Market Account (SOMA). The SOMA manager is a vice president of the Federal Reserve Bank of New York. Each Reserve bank houses a research division that studies regional economic and financial developments, and reports its findings to the Board of Governors and to the FOMC. The Reserve banks also provide the securities needed for open market sales, and take their pro rata share of security purchases made by the Federal Reserve System.

The Federal Reserve System The member banks of the Federal Reserve System consist of national banks, which are required to join the system, and state-chartered banks that agree to conform to the Fed’s rules. At year-end 2000, there are 2,230 national banks and just under 1,000 state-chartered banks registered as members of the Federal Reserve System, compared to more than 5,000 nonmember banks.

The role of Federal Reserve System today Collecting and clearing checks and other means of payment (through an electronic network known as the FEDWIRE) Issuing currency and coin Maintaining a sound banking and financial system, by serving as a lender of last resort (through the discount window of each Reserve bank) and by supervising member banks Serving as the Federal government’s fiscal agent, by holding the Treasury’s checking account and by maintaining reasonable stability in the government securities market Providing information to the public, through statistical releases and research reports Carrying out monetary policy, through the use of various tools

The Federal Reserve System

The Federal Reserve System

Central Banking in Indonesia Peran dan kelembagaan bank sentral di Indonesia mengalami evolusi dari bank sirkulasi hingga bank sentral spt dewasa ini ....... 19 1945-1952 1953-1967 1968-1998 1999 Bentuk formal bank sentral belum ada. De Javasce Bank (DJB) vs BNI. BI sbg bank sentral RI. Bagian dr Pemerintah Peran Dewan Moneter BI sbg bank sentral RI Bagian dr Pemerintah Peran Dewan Moneter Status UUD 1945 Pasal 23: BI sbg bank sentral UU Nasionalisasi DJB UU No. 11 Th 1953 ttg BI sbg pengganti DJB wet 1922. UU No. 13 Th 1968 ttg Bank Sentral. Landasan Hukum Peran sbg: (i) Agen Pemb, (ii) Kasir Pem, (ii) Bankers bank Masih menjalankan fungsi bank komersial. Tugas: (i) Stabilitas moneter, (ii)Pengedaran uang, (iii) Sistem pembayaran. Masih berperan sbg: (i) Agen Pemb., (ii) Kasir Pem, (ii) Bankers bank. Fungsi bank komersial tidak ada lagi. Tugas: (i) Stabilitas nilai rupiah, (ii) Mendorong produksi, kesempatan kerja. DJB dan BNI sbg bank sirkulasi. Mata uang Belanda & Jepang vs. ORI. Peran Stabilisasi ekon (1968-72) Boom minyak (1973-82) & keb mon langsung (KLBI). Deregulasi (1983-92) dan keb mon tidak langsung. Krisis 1997, BLBI, reformasi. Konflik tujuan stabilitas nilai rupiah vs. tujuan lain Dominasi politik dan pembiayaan bank sentral. Pencetakan uang vs. Sanering (Gunting Sjafrudin) 1950. Pencetakan uang utk defisit fiskal vs. Sanering 1959 dan hyperinflasi 1965/68. Peristiwa Penting

Central Banking in Indonesia Established in 1953 as the central bank while functioning commercial banking, taking over the role of de Javasche bank (a commercial bank and the bank for money circulation since 1827) Bank Indonesia’s role Maintaining monetary stability Money circulation Banking supervision and development Commercial banking Monetary Board (a government body) responsible monetary policy, and Bank Indonesia responsible for its implementation Under UU 13/1968, Bank Indonesia was setup as a pure central bank, eliminating its commercial operation but maintaining its role as the agent for national development, cashier for government and bankers’ bank. BI can extend credits to commercial banks (KLBI, BLBI) Conflict between promoting growth/employment and containing inflation

Bank Indonesia Dasar Hukum Tujuan Peran dan kelembagaan bank sentral di Indonesia dewasa ini menganut prinsip-prinsip bank sentral modern yang juga diterapkan di negara-negara lain ....... 21 Dasar Hukum UU No. 23/1999 tentang Bank Indonesia sebagaimana diamandemen dengan UU No. 3/2004 Tujuh aspek amandemen: (1) Penetapan sasaran inflasi, (2) Pengalihan pengawasan bank, (3) Penyediaan financial safety nets, (4) Mekanisme pencalonan Dewan Gubernur, (5) Penguatan akuntabilitas dan transparansi, (6) Pembentukan Badan Supervisi, (7) Persetujuan anggaran operasional oleh DPR Tujuan Menganut single objective, yaitu menjaga kestabilan nilai rupiah, dalam arti inflasi dan nilai tukar. Dengan sistem nilai tukar mengambang, tujuan diarahkan kepada kestabilan harga (inflasi). Nilai tukar berdasarkan mekanisme pasar. Intervensi BI untuk mencegah gejolak guna kestabilan nilai tukar. Penetapan sasaran inflasi oleh Pemerintah setelah berkoordinasi dengan BI. BI tidak lagi goal independence, tetapi masih instrument independence. Koordinasi kebijakan moneter BI dengan kebijakan fiskal/makro ekonomi Pemerintah semakin diperlukan.

Bank Indonesia Tugas 22 Tiga tugas: (1) Pengendalian moneter, (2) Pengawasan bank, (3) penyelenggara/pengatur sistem pembayaran. Pengendalian moneter: Penetapan sasaran-sasaran moneter untuk mencapai sasaran inflasi. Instrumen moneter terutama dengan OPT melalui lelang SBI dan SUN. Sasaran operasional uang primer telah beralih ke sasaran suku bunga sesuai Inflation Targeting. Pengawasan perbankan: Pengaturan dan pengawasan bank untuk menciptakan sistem perbankan yang sehat dan kuat, termasuk percepatan fungsi intermediasi perbankan. Penerapan 25 Basle Core Principles dan Risk Based Supervision. Arsitektur Perbankan Indonesia (API) sbg arah ke depan. Penyelenggaraan sistem pembayaran: Tunai (uang kertas dan logam) dan non-tunai (giral, kliring, dan alat pembayaran lain). Sistem kliring beralih dari manual dan ritel ke elektronik dan Real Time Gross Settlement (RTGS). Amendemen UU BI: Pengalihan pengawasan bank akhir 2010 dan pengaturan financial safety nets. Koordinasi erat dengan Pemerintah: Kebijakan moneter dgn kebijakan fiskal Pemerintah. Peran internasional: Keanggotaan pada IMF dan lembaga internasional lain, manajemen utang luar negeri, dsb.

Bank Indonesia Kelembagaan Manajemen Bank Indonesia : 23 Manajemen Bank Indonesia : Kepemimpinan: Dewan Gubernur sebagai pembuat kebijakan. Diusulkan oleh Presiden dan disetujui DPR. Masa jabatan 5 tahun dg akhir masa jabatan berjenjang. Perumusan kebijakan: Dalam Rapat Dewan Gubernur (RDG) secara terjadwal (bulanan dan mingguan). Organisasi: Kantor Pusat (29 Direktorat/Biro), Kantor BI di daerah (37), Kantor Perwakilan di LN (4). Nilai-nilai strategis: Kompetensi, Integritas, Transparansi, Akuntabilitas, dan Kebersamaan. Independensi: (1) Kewenangan penuh dlm melaksanakan tugas yang telah ditetapkan UU (independensi instrumen), dan (2) Larangan campur tangan dari pihak lain (independensi lembaga). Akuntabilitas: Kepada DPR dalam bentuk laporan pelaksanaan tugas (triwulanan dan tahunan) dan penilaian kinerja (tahunan) terhadap institusi dan Dewan Gubernur. Transparansi: Koordinasi dan informasi dg Pemerintah, komunikasi keputusan RDG, publikasi laporan dan kebijakan, kemitraan strategis dan constituent building dg stakeholders, pembelajaran masyarakat.

STATUS DAN KEDUDUKAN BI DALAM KETATANEGARAAN RI 24 Menyampaikan laporan keuangan BI yang telah diperiksa BADAN PEMERIKSA KEUANGAN DEWAN PERWAKILAN RAKYAT PRESIDEN MAHKAMAH AGUNG Kepala Negara Kepala Pe- merintahan Laporan triwulanan/sewaktu-waktu, Tahunan Hasil telaah UU BI (UUD 45) Pimpinan BI (UU BI) Mengambil sumpah dan janji anggota Dewan Gubernur Memeriksa laporan keuangan BI Badan Supervisi Informasi tertulis triwulanan/sewaktu-waktu BANK INDONESIA Lembaga Negara dengan Badan Hukum Publik Lembaga Negara (UU No. 23 /1999 UU No.3/2004) Departemen PUBLIK ( Informasi Tahunan )

Struktur Organisasi Bank Indonesia 25 Dewan Gubernur Gubernur Deputi Gubernur Senior Deputi2 Gubernur Direktorat Direktorat Direktorat Direktorat Direktorat Direktorat dst PPSK Unit Khusus Biro Kantor Bank Indonesia di daerah Kantor Perwakilan di luar negeri

Bank Indonesia’s Balance Sheet (Rp. bio) Assets 2005 Liabilities 2005 Gold 15,570.2 Foreign currencies 14.8 SDR 68.9 Demand deposits 12,283.8 Time deposits 47,260.5 Marketable securities 312,626.8 Claims on government 301,472.6 Claims on banks 14,197.7 Claims on others 22,030.9 Allowance for bad debts (48,292.6) Equity participation 820.7 Other assets 8,609.9 Currency in circulation 144,878.6 Demand deposits 233,845.3 Government 50,521.0 Commercial Banks 105,194.4 Int’l Financial inst 77,748.2 SBIs 131,442.5 Loans from government 2,540.6 Foreign borrowings 13,403.3 Other liabilities 29,606.5 Equity 121,683.4 Total assets 686,664.2 Total liabilities 686,664.2