Document Type
Case Study
Case Series
Blanket Guarantees
JEL Codes
G01, G28
Abstract
The Indonesian government closed 16 banks on November 1, 1997. At the time, the government said it would guarantee depositors up to 20 million Indonesian rupiah (IDR; USD 6,000) per account. The lack of immediate full protection for large depositors caused deposit runs throughout the banking sector and undermined foreign confidence in the Indonesian financial system. In response, the Indonesian president on January 26, 1998, announced a blanket guarantee and created the Indonesian Bank Restructuring Agency (IBRA) to administer the guarantee and other bank rehabilitation efforts. The blanket guarantee covered all depositors and nonsubordinated creditors in locally incorporated commercial banks. An official estimate of the total amount of covered liabilities is unavailable; for context, Indonesian banks had USD 209 billion in liabilities in June 1997, of which USD 110 billion were in rupiah deposits and USD 34 billion were in foreign currency deposits. The blanket guarantee lasted until September 22, 2005, when the government replaced it with a limited deposit insurance scheme administered by the Indonesian Deposit Insurance Corporation.
Recommended Citation
George, Ayodeji
(2022)
"Indonesia: Blanket Guarantee, 1998,"
Journal of Financial Crises: Vol. 4
:
Iss. 4, 201-213.
Available at:
https://elischolar.library.yale.edu/journal-of-financial-crises/vol4/iss4/9
Date Revised
2022-12-22
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