Board of Governors Regulation Number 7 of 2026 Tightens Forex Thresholds and Introduces New Hedging Arrangements

Introduction

On 26 March 2026, Bank Indonesia issued Board of Governors Regulation Number 7 of 2026 on Amendments to Board of Governors Regulation Number 11 of 2024 on Foreign Exchange Market Transactions (“PADG 7/2026”), which will take effect on 1 April 2026. This regulation introduces adjustments to the nominal thresholds for transactions without underlying, hedging options, and the timing of reference rate publication. PADG 7/2026 aims to update the governance of foreign exchange transactions to ensure greater efficiency and alignment with the dynamics of modern financial instruments.

This regulatory amendment accommodates the rapid development of the foreign exchange market and strengthens policies supporting Rupiah exchange rate stability. It also addresses challenges in managing increasingly complex derivative transaction risks and anticipates emerging business models in the financial sector that require a more precise, harmonized, and secure regulatory framework for all market participants.

 

Comparison

PADG 7/2026 amends several provisions previously regulated under Board of Governors Regulation Number 11 of 2024 on Foreign Exchange Market Transactions (“PADG 11/2024”). The following table presents a comparison between PADG 7/2026 and PADG 11/2024:

 

Key Provisions

Completeness of Supporting Agreements for Financial Contracts

Pursuant to Article 3 paragraphs (2a) and (2b), Bank Indonesia allows transaction participants to supplement financial contracts in the form of master agreements with supporting agreements. Such supporting agreements may include a credit support annex or other formats agreed upon by the parties.

Dynamic Hedging Mechanism in Call Spread Options

Article 16A paragraphs (1) and (2) stipulate that banks may conduct call spread option transactions using a dynamic hedging mechanism, whereby banks may utilize the same Underlying Transaction as used in the initial transaction. Article 16A paragraph (3) sets out the following requirements:

1. The new exchange rate range must not overlap with the range of the initial call spread option transaction; 
2. The tenor of the call spread option transaction under the dynamic hedging mechanism must be at least 1 (one) month (if the initial transaction has a remaining tenor of one month or more), or equal to the remaining tenor if less than 1 (one) month. 

Expansion of Cover Hedging Transactions

Under Article 18 paragraph (1), banks may conduct cover hedging with foreign banks not only for direct customer transactions but also for re-hedge transactions conducted by other domestic banks. Article 18 paragraph (3) requires banks to ensure the availability of supporting documents:

1. Underlying Transaction documents from the originating bank’s customer conducting the re-hedge; or 
2. A written statement confirming that the transaction is for re-hedge purposes, with the bank’s commitment to present the customer’s underlying documents to the authority upon request. 

Adjustment of Transaction Thresholds 

Article 25 paragraph (1) reduces the threshold for foreign currency cash purchase against Rupiah to USD 50,000 or its equivalent per month per market participant. Meanwhile, Article 25 paragraph (2) letter b and paragraph (3) increase the threshold for derivative sell transactions without underlying (forward, domestic non-deliverable forward, and swap) to USD 10,000,000 per transaction. For other derivative sell transactions (outside forward, domestic non-deliverable forward, and swap), the threshold remains at USD 1,000,000 or its equivalent per transaction.

Exception to the Prohibition on Credit for Non-Residents 

Article 47 paragraph (1) letter b1 provides an exception to the prohibition on granting credit to Non-Residents if such entities provide collateral in the form of fund placement in Indonesia. Banks must ensure compliance with the following requirements:

1. The credit ceiling must not exceed the value of the fund placement used as collateral; 
2. The credit tenor must not exceed the remaining tenor of the fund placement; 
3. The fund placement must be held at the same bank providing the credit; 
4. The credit or financing must be used for economic activities in Indonesia; and 
5. Compliance with other applicable Bank Indonesia regulations. 

Sanctions for Reporting Obligations

Article 51A stipulates that banks failing to fulfill reporting obligations related to foreign exchange market activities to Bank Indonesia will be subject to sanctions. Sanctions for delays in periodic reports follow general Bank Indonesia reporting regulations for commercial banks, while violations related to incidental reporting may result in written warnings.

 

Transitional Provisions

Upon the entry into force of PADG 7/2026 on 1 April 2026, all foreign exchange market transactions that have been agreed upon or are ongoing shall remain valid and continue to be governed by PADG 11/2024 until the respective contracts expire in accordance with their maturity dates.

If customers conduct foreign currency cash purchase transactions exceeding USD 50,000 up to USD 100,000 during April 2026, they are required to subsequently submit the Underlying Transaction documents and/or supporting documents to the bank no later than 31 July 2026. Banks are also granted until 31 July 2026 to submit corrections to periodic reports to Bank Indonesia for transactions occurring during this transitional period.

 

Closing

PADG 7/2026 enhances the governance of foreign exchange transactions to improve efficiency and support Rupiah exchange rate stability. The policy tightens the threshold for foreign currency cash purchases without underlying to a maximum of USD 50,000 per month while increasing the threshold for derivative sell transactions to USD 10,000,000 per transaction. In addition to advancing the publication time of JISDOR to 15:15 WIB and removing futures from plain vanilla transactions, the regulation expands operational flexibility through the introduction of dynamic hedging, cover hedging for domestic re-hedge transactions, and exceptions to the prohibition on credit for Non-Residents secured by fund placement. The implementation of this regulation is further supported by strengthened reporting sanctions and transitional provisions that ensure the continuity of existing contracts while providing a transition period for completing underlying documentation for certain transactions until 31 July 2026.