E-Cash Collateral: A New Global Paradigm of Security Law

Bambang Daru Nugroho

, Tarsisius Murwadji

, Hernadi Affandi

and Nahrowi

Faculty of Law, Padjadjaran university, Bandung, Indonesia

Faculty of Shari’a and Law, Universitas Islam Negeri Syarif Hidayatullah, Jakarta, Indonesia

Keywords: Electronic Guarantee, Performance Guarantee, Risk Cover, SWIFT, Warranty Digitalization.

Abstract: Indonesia’s Security Law is running slowly yet legislators have not taken initiative to renew the law.

Applicable law regulates that guarantee functions to cover risk of bank’s losses in case of bad credits. This

article proposes and examines new paradigm in security Law, such as Performance Guarantee, Digitization

of Assurance, and Electronic Assurance. Digitization of collateral intended to guarantee credit by the object’s

value, not physical. Value is entered into checking account at issuing bank, which can be secured

electronically to the lender through SWIFT. Collateral e-cash guarantee can be conducted across borders, and

suitable for regional and global financing.

1 INTRODUCTION

Security law system in Indonesia has not been fully

utilized to insure large bank loans; it can be said that

it is outdated. One of the reasons is the positive law

on guarantees still leans on the Dutch Colonial

Guarantees Law. The proof of lagging is that there are

thirty-two permits for the development and

management of toll roads in Indonesia that have been

owned by national companies, both private and state-

owned, since 1996 until 2014 due to lack of funds.

The lack of funds is one of the causes that these

companies are not able to prepare a big guarantee for

the financing of toll road development projects. If this

problem is not immediately solved, then in the near

future most projects will soon be taken over by

foreign companies, potentially threatening the

sovereignty of the state in the economic field.

The current Guarantee Law in Indonesia, such as

the Deposit Insurance Law, the Fiduciary Law, and

the regulation on mortgage only stipulate limited

guarantees in the form of land, houses, and goods of

small values. Thus, security law in Indonesia should

be evaluated, revised and developed, so it can be used

as a legal basis for guarantees of a great value.

Guarantees under Indonesian law both in terms of

material security and individuals are very difficult to

guarantee for big projects due to the following

reasons:

 The collateral in the form of land, buildings, cars,

and other material security have small value for

big projects. For example: for the smallest Toll

Project, the Soroja l (Soreang-Pasir Koja)

Highway is estimated to be worth Rp2.5 trillion,

while the value of the collateral must be 140% to

160% of the project value, thus it requires a big

amount of collateral.

 In practice, Indonesian entrepreneurs should

establish international legal entity, such as legal

entities established in Singapore, Hong Kong,

Kuala Lumpur and so on. If warranty of the

material located in Indonesia, while it uses the law

from other countries, it will cause the issue of

execution.

 The value of projects in Indonesia, for example

toll road projects often change due to price

changing in land prices and material prices to

build roads, such as cement, iron, and so on.

Changes in the value of this project should be

followed by changes in bank’s credit agreements

and changes in collateral. The change is certainly

is not easy to do, and if it can be done, it requires

a long time and big cost.

 Surveillance of guarantees: material security,

such as land, buildings, cars, and so on are easily

diverted and potentially damaged, such as land

and buildings affected by natural disasters.

 Change of designation: large financing is usually

a long term financing of at least 5 years and a

maximum of 20 years. In the long span of time,

usually the guarantee of land often changes the

designation, making it difficult to be executed.

Nugroho, B., Murwadji, T., Affandi, H. and Nahrowi, .

E-Cash Collateral: A New Global Paradigm of Security Law.

DOI: 10.5220/0009920209290936

In Proceedings of the 1st International Conference on Recent Innovations (ICRI 2018), pages 929-936

ISBN: 978-989-758-458-9

929

 Documentation of warranties: evidence of

collateral in the form of letters should be

documented safely in the long term. For large

credit, it requires a lot of guarantees because the

guarantees have small value which means that

there are many proofs of guarantee. Thus, the

problems of securing the documents of guarantee

letters also cause problems.

From the above description, security law in

Indonesia has not fully guaranteed legal certainty in

infrastructure projects with big funds from banks or

international financing institutions. Whereas, bank is

a financial institution which called intermediary

institution, that runs according to its clients trust

(Murwadji 2015).

In conjunction with the construction of

infrastructure in the form of toll roads with

geographical conditions in the form of an archipelagic

state, it is required that the Government of Indonesia

to cooperate with investors to construct toll roads that

cross the inter-island sea or juridical called

"archipelagic waters".

The construction of inter-island toll roads costs

much more than the mainland toll roads. For

comparison, the cost of the 14 km-long Soreang-

Pasirkoja toll road is Rp2.5 trillion, while the 29-km

toll road construction of the Sunda Strait Bridge costs

Rp270 trillion. So the cost of inter-island toll road

costs 54 times the cost of land toll.

With the big cost mentioned above, it causes

many problems to obtain national and international

syndication credits. One of the crucial issues is the

underlying guarantee. According to Article 8 of the

Banking Law, credit principal is the project financed

by the credit. In the case of the toll road financing, the

collateral is the toll road and land construction used

for the toll road. In the case of inter-island toll road

financing, only the toll bridges can be guaranteed

because the land under the sea that connects the two

islands has not been regulated explicitly as collateral

for bank credit, and until now there is no bank that

has provided credit with the guarantee of Mainland

Archipelagic Waters.

Based on the above descriptions, We centralize

this research on bank guarantees in the form of land

under inland waterways to guarantee national and

international syndication credits. Based on

preliminary research conducted by myself, research

on the Mainland Archipelagic Waters, a bank credit

guarantee has not been examined, and this topic is my

original thoughts.

Based on the description of the problem in the

introduction, the formulation of the problem is as

follows:

 How is performance guarantee as the solution of

banking guarantee problem in Indonesia for the

development of guarantee law in Indonesia?

 Is the guarantee of rights of islands waters

management in Indonesia feasible as a new

paradigm of guarantee law in Indonesia?

 What is the rationale for digitalization as the basis

for electronic guarantee in Indonesia?

 Be advised that papers in a technically unsuitable

form will be returned for retyping. After returned

the manuscript must be appropriately modified.

2 MATERIALS AND METHODS

The methods used in this study i.e., legal research

methods with normative juridical approach that

prioritizes how researching references (secondary

data) in the form of positive law. This method prefer

research librarianship and how its implementation in

practice. Methods of juridical normative approach

includes an examination of the principles of law, legal

systematic, the synchronization level of the law.

Methods of juridical normative approach is used with

the intent to discuss the positive law of Indonesia is

associated with the data field as a support.

The nature of this research is a descriptive

analytical, i.e. a specification describing the facts of

the data obtained based on reality. The fact is then

associated with the applicable law, discussed,

analyzed, and drawn a conclusion that eventually are

used to address existing problems. Researchers

analyzed the relation between the applicable

legislation with legal theories and practice of

implementation of positive law that concerns the

problems concerning local wisdom that can be used

in dealing with bad credit.

This research was conducted in two stages,

namely the research libraries (library research) and

research in the field. Research libraries are aimed at

reviewing, researching and searching secondary data

in the form of primary law, secondary and tertiary.

The field research performed to obtain primary data

in the field as a result of secondary data collection and

interviews with practitioners, academics as well as

other professionals who have the competence with the

material of the research in the writing of the law.

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3 RESULTS AND DISCUSSION

3.1 Performance Guarantee as a New

Theory Development of Legal

Guarantee in Indonesia

Bank is defined according to Article 1 number (2) of

Law Number 7 of 1992 as amended by Act Number

10 of 1998, concerning Banking as "a corporate entity

mobilizing funds from the public in the forms of

Deposits and channeling them to the public in the

forms of Credit and/or other forms in order to

improve the living standards of the common people".

In conducting its business, Indonesian banking

system has always applied the principle of prudence,

as stated in Article 2, Law Number 7 of 1992, as

amended by Act Number 10 of 1998, concerning

Banking that “Indonesian banking in conducting its

business is based on economic democracy by using

the principle of prudence.

The activity of raising and channelling funds is a

principal activity of banking. It is more firmly stated

in Article 3 of Law Number 7 of 1992 as amended by

Act Number 10 of 1998, concerning Banking that the

main function of Indonesian banking is as the

collector and distributor of funds community

Furthermore, in Article 4 of Law Number 7 of

1992 as amended by Act Number 10 of 1998

concerning Banking, it is stated that Indonesian

banking aims to support the implementation of

national development in order to improve equity,

economics growth, and national stability towards the

improvement the welfare of the masses.

The distribution of funds through credit to the

community is an activity that plays a very important

role in the life of a banking business. One of the

government's active roles in regulating banking

policy is by assigning banking institutions to channel

or provide credit to the community in need to improve

the economic welfare of the community.

Based on the provisions of Article 1 letter (k) of

Law Number 7 of 1992 as amended by Act Number

10 of 1998 concerning Banking, the meaning of credit

is "the provision of money or equivalent claim to

money based on a loan agreement between a Bank

and another party, obligating the borrowing party to

repay his debt after a certain period with interest"

In its function as a financial intermediary, one of

the bank's main activities is to channel funds to a

society known as "Banking Credit". The main

revenue from the bank is expected from lending, in

the form of interest. Banking is a sensitive business

because it relies on public confidence to the bank. in

granting the credit, a bank shall take into account the

principles of sound crediting, in the sense that there is

a confidence in the debtor’s ability to settle their

obligations in accordance with the contract.

Given this belief, the bank expects a lot for the

credit given to the debtor customers to not to have a

loan problem, or even become bad credit in the future.

Prior to granting credits, the bank shall conduct a

thorough analysis of the willingness and the ability of

the debtor customers to settle the debt or to refund the

financing in accordance with the contract.

Bank is a business entity based on public trust and

a financial institution in which every company and

individual entrust their funds. Through the bank

services, flow of goods and services can be done

smoothly and the payment traffic can run efficiently;

therefore, in the banking business public trust must be

maintained (Hasan 1999).

According to Thomas Suyatno, the elements

contained in the meaning of credit are (Suyatno

1993):

 Trust, such as the existence of confidence from

the bank on the achievements that it gives to the

debtor to be repaid as agreed at a certain time;

 Time, such as the existence of a certain period of

time between the granting and repayment of

credit, the period of time previously approved or

mutually agreed between the creditor and the

debtor;

 Achievement and Consideration, such as the

existence of certain objects in the form of

achievement and consideration at the time of

reaching approval or credit agreement as outlined

in credit agreement between creditor and debtor

that is in the form of money or bill measured with

money and interest or reward or even without

reward for Islamic Bank;

 Risk, the presence of risks that may occur during

the period between granting and repayment of

such credit.

In order to implement prudential principles, banks

are obliged to conduct comprehensive analysis of

various aspects, including character, capability,

capital, collateral and the condition of the economy or

commonly called the five Cs of credit analysis (5C

analysis), in accordance with the provisions stipulated

by Bank Indonesia.

In relation to the 5C analysis, We propose a new

opinion in the grouping of guarantees, i.e. collateral

divided into two, namely:

 Guarantees in the broad sense: the guarantee of

the company (customer debtors) to good

performance so that it is able to meet the

implementation of credit agreements and the

survival of the company, at least until the

E-Cash Collateral: A New Global Paradigm of Security Law

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repayment period of credit. We argue that the 5C

analysis is a guarantee in a broad sense.

 Warranty in the strict sense: that is part of the

guarantee in the broadest sense, i.e. the fourth C:

collateral or collateral. The function of the

guarantee in the narrow sense is as closing risk

when a bad credit occurs. As has been described

in the background of this article that the problems

faced by large, medium and small entrepreneurs

in Indonesia in obtaining credit banking is the

inadequacy of the company to guarantee the credit

repayment (bankable). This condition shows that

the guarantee has not been fulfilled in the broad

sense. The solution is a credit worthiness analysis

focused on the fulfillment of the guarantee in the

narrow sense (feasible), as a powerful weapon to

cover credit risk.

We argue that banking policy that loosens the

guarantee in the broadest sense and tightens the

guarantee in the strict sense is a big mistake that will

have a negative impact. The negative impacts are the

debtor customer company will continue to be unfit for

banking credit, while preparing adequate collateral

will cost a lot. It can be concluded that the debtor

customer company sacrifices a lot of time, thought,

cost, and effort to provide assurance of things rather

than focusing on the company's core business.

The condition must end by strengthening the

guarantee in a broad sense by loosening the guarantee

in the narrow sense. In this article, We present a new

theory in the law of assurance; it is Performance

Guarantee. According to this theory, in terms of the

four credit application requirements, namely

character, capability, capital, and business outlook are

met, collateral is only a formality to fulfill the

obligation for the bank to examine the ability of the

prospective debtor to prepare the guarantee as a credit

application requirement.

Technical analysis of the Performance Guarantee

Theory is done quantitatively and qualitatively.

Technical quantitative analysis is intended to assess

the achievement of standard numbers. For example,

credit approval is required to achieve a score of 70%.

If the calculation and summation of figures from

character, capital, ability and economic condition

reach 80% score, then logically credit application

should be approved and the collateral is only a

formality. The rationale of this new theory is if the

performance of the company is good, in the sense that

it can fulfill the credit agreement, then the guarantee

becomes unimportant.

The Performance Guarantee Theory is based on

the Legal Theory of Development by Mochtar

Kusumaatmadja that law must be active and used to

change certain circumstances and conditions in

accordance with the wishes of the community (W

1990). In addition, rules or laws that serve as a means

of community renewal, based on the idea that it can

serve as a means of regulating human activities in the

direction desired by development or renewal

(Kusumaatmadja 1990).

In achieving the objectives of the national

development in the field of economy, that is to

achieve a just and equitable welfare in order to fulfill

human needs must be balanced with development in

the field of law that is able to follow the development

of society. The existence of law is very necessary as

a means to realize the changes that exist in society in

order to achieve the goal of economic development,

namely the just welfare (economic democracy). The

understanding is proposed by Roscoe Pound, who is

known as a sociological jurisprudence marketer as it

is believed that law is a tool for social engineering

(Rasjidi and Rasjidi 2002).

3.2 Guarantees the Rights of Islands

Watershed Management in

Indonesia as a New Paradigm of

Warranty Law

The basic idea on the guarantee of large-scale credit

in financing the inter-island toll road with the

guarantee of the Mainland Waters Land Management

Rights due to the development of paradigm by

Government of President Joko Widodo and Vice

President M. Yusuf Kalla leading to the construction

of maritime. According to Etty R. Agoes, in Indonesia

there is political development after the end of the New

Order government. The impact of the centralized

order of the centralized government has led to

demands for reform which, among other things,

resulted in wider recognition of regional autonomy.

Law No. 22 of 1999 on Regional Government grants

Regional Authority at sea. Article 3 of the Act

provides "The territory of the Provincial Region, as

referred to in Article 2 paragraph (1), shall consist of

land territories and territories as far as twelve miles

sea measured from the coastline towards the open sea

and/or towards the Mainland Waters".

Regional authorities in the sea shall be further

regulated in Articles 2 and 3 that regional authorities

in the territorial sea, as referred to in Article 3, shall

include:

 Exploration, conservation, exploitation, and

management of marine resources to the extent of

the territorial sea;

 Arrangement of administrative interest;

 Spatial arrangement;

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 Law enforcement of regulations issued by the

regions or delegated authority by the Government

Support of security enforcement and state

sovereignty.

The authority of the Regency and Municipal

Region in the sea territory, as referred to in Paragraph

(2), is one third of the provincial sea border.

Legal provisions intended to give more role to this

region have proved to cause various problems

because in the implementation it has resulted in the

separation of marine area management. One thing

that can be interpreted not in accordance with the

ideals of Archipelago Insight to make the territory of

Indonesia as a whole in form the Unitary State of the

Republic of Indonesia (NKRI). The impact of its

implementation has caused problems in the

management of the sea, due to the emergence of

various disputes, mutual catching of ships, seizure of

territory and others (Agoes 2013).

Lately there has also been the desire of a number

of provinces whose territory consists of island or

islands to form a new unity called the island province,

following the principles recognized by international

law applicable to an archipelagic state, and not for

parts of a country. It is conceivable that if the desire

is accommodated then it is questionable about the

existence of the unitary Republic of Indonesia as well

as the recognition of the territory Archipelago Insight.

The embodiment of Archipelago Insight based on

Broad Outlines of State Policy (GBHN) 1973 and

1978 are still been heard of. But other things that have

been spoken have different implemented. The

management of the sea is far from integrated, and it

has said to be increasingly segmented by sector. The

jealousy between sectors has given rise to aversion

for synchronization or harmonization in neither its

regulation nor its management.

Indonesia as an archipelago based on Article 2 of

Law No. 6 of 1996 on Indonesian waters holding on

4 pillars that are the four elements of Indonesian

nationalist independence, namely Pancasila, UUD

1945, NKRI & Bhinneka Tunggal Ika are a package

to gain an independent soul from the Indonesian

nation, both free souls in the sense of self-sovereign,

and free spirit in the sense of united-tolerance. One of

them is the Unitary State of the Republic of Indonesia

(NKRI) which symbolizes the Unitary State. The

transportation problems caused by the geographical

condition of Indonesia as a state of archipelago in

practice, holds up the realization of the Unitary

Republic of Indonesia, which should able to be

implemented in the construction of toll bridges and

non-toll road projects.

Specific arrangements on the Rights of Islands

Watershed Management are of paramount

importance, because on the Mainland Islands Waters

can be placed land rights, such as Cultivation Rights,

Building Rights as mentioned in Article 16 of BAL

and according to Mortgage Law can be guaranteed.

As a result of the regulation, both

districts/municipalities and the Central Government

have the potential to earn a Local Own Revenue with

a profit-sharing system in projects above the Right to

Management. As the development of these projects

can increase the welfare of the community around the

waters of the Islands, for example the community

around can be used as project personnel and as

employees who work on company partner in the

fishery sector, seaweed resources and so forth.

Regarding the legal issues of Bank Indonesia

Guarantee Law in guaranteeing Land Rights over the

Right of Islands Watershed Management in terms of

legislation on Guarantee is going to be a legal vacuum

because the arrangement of territorial waters land

guarantee has not been regulated. Until now there

have been no prospective borrowers who apply for

credit with the guarantee of the Mainland Waters

Land Management Rights.

From the banking aspect, good banking guarantee

can be viewed from three aspects: legal, economic,

and strategic. At this time the Mainland Waters of the

Islands do not include guarantees which are

categorized as good banking guarantees when

reviewed according to the above three aspects,

namely:

 Legal Aspects

In the legal aspect there is a legal vacuum, because

there is only a special regulation on the authority of

the Watershed Management Rights based on Law

No.27 of 2007 limited to 12 miles, so that the area can

be said to be a "no-man" territory as a result of the

Right of Management in the power of the central

government. Proof of ownership of Regional

Government from waters land also not yet exist,

hence there is legal problem to propose mainland

waters as bank guarantee.

 Economic Aspects

Until now the economic aspect does not have any

activities on the projects undertaken in the waters of

the island area that are bankable to be financed by

banks. I argue that banks will not be interested to

discuss the financing guaranteed by the Mainland

Waters Land Management Right.

 Aspects of Strategy

From the strategy aspect, firstly, the execution of

the guarantee on the Management Rights of the

Mainland Waters has difficulties even it is impossible

E-Cash Collateral: A New Global Paradigm of Security Law

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to do because the land is state-owned, so it cannot be

executed through the auction. Secondly, there has

been no policy regarding the guarantee of Mainland

Islands by the Banking Authority so that the Banking

has not been "minded" to fund the projects guaranteed

by the Right to Management.

Against the weakness of underwriting of the

Mainland Islands Watershed Management Rights, the

author argues that the statement is only applicable in

the case of non-fulfillment of "Guarantees in a broad

sense" i.e. the assessment of the quantity and quality

of character, capacity, capital and business prospects

(economic condition) does not achieve minimum

scores or not bankable.

The opposite will occur if quantitative and

qualitative accounting of character, capability, capital

and business outlook have been met, then the

collateral is a formality only to fulfill the obligation

of the bank to examine the ability of the prospective

debtor to prepare the guarantee as a credit application

requirement.

The author concludes that the position of the

Mainland Watershed Management Rights as

collateral is a good guarantee in terms of legal,

economic and strategic aspects when the minimum

score of guarantee criteria is calculated in a broad

sense. Conversely, if the minimum score is not

achieved, then the position is as a bad guarantee.

This new theory of Performance Guarantee will

change the paradigm of security law which prioritizes

the achievement of warranties in a broad sense and

loses the guarantee in a narrow sense.

3.3 The Rationale for Digitalization as

the Basic Electronic Guarantee in

Indonesia

In international business, it is imperative that the

smoothness of financial transaction and business

actors' performance always avoid obstacles. To

anticipate this, the parties involved in a financial

transaction often involve a third party in the liquidity

of funds. In order to accommodate these interests,

professional business must be able to utilize

maximally the services of financial institutions such

as banking (Suyatno 1993).

Practically the role of banking institution services

as supporting business activities is through the

issuance of Bank Instruments. Banking instruments

are provided by the banking industry to assist in the

improvement and realization of the smoothness of all

aspects of sustainable business forms.

One of the banking industry products which are

bank’s instrument, which I focus on, is the bank

guarantee. Bank guarantee is one of the instruments

that can be used in business transactions and other

forms of business to ensure the adequacy and ability

to conduct financial transactions. Bank guarantees

issued by banks and provided to their customers

constitute a credit facility directly from the bank. The

role of bank guarantees can be categorized as one of

the core components of the financial transaction

system and can serve the needs of financing and

expedite the mechanism of payment systems of

various sectors of the economy. The usefulness of

bank guarantees in some sectors of the economy is to

support the guarantee of the flow of goods and

services from business actors destined to its users.

Bank guarantees are supporters of most business

movements and are related to the circulation used as

a means of exchange or payment, as well as moving

objects that have economic value so that the monetary

policy mechanism can work. These things indicate

that the bank guarantee is a financial instrument that

plays an important role in carrying out economic and

trade activities as a transaction bond.

The development of an increasingly developed

economy always involves the banking industry;

hence, the function of bank guarantees as a security

instrument is always used in reducing the risk of

reliable business transactions related to the

requirements of a healthy business as well as

providing a better position for the issuer and the bank

guarantee recipient as it gives "better negotiable

terms and condition (Miller and Jentz 2002).

In relation to bank guarantees as collateral

attributable to the underwriting of land areas and

digitization of warranties, it can be described that

nowadays, the mechanism of underwriting is done by

interpreting the value of the guarantee made with the

official appraisal apparatus based on standard

assessment norms. Once assessed, then the guarantee

is made binding of the guarantee in certain form, for

example by pledge, mortgage rights, fiduciary and

mortgage. The value is only a preliminary reference

in the process of credit approval process. The value

of the risk cover depends on the proceeds of the sale

through the auction, so there is no legal certainty.

The legal theory proposed by the author on the

assessment of collateral is immaterialization of the

guarantee. The immaterialization of collateral is

essentially a transformation of certain security assets,

such as gold into the nominal value of a particular

currency for subsequent incorporation into a bank

account. The bank that performs the

immaterialization process by the Author is called the

Issuing Bank of Guarantee. Guaranteed items are

stored in the safe deposit box at the bank.

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Furthermore, the issuing bank will issue the

documents required for the guarantee. For example,

documents issued by a foreign bank, which in the

opinion of the Author is immaterialization of the

guarantee that includes Acknowledgment As to Bank,

Authentication Letter, Bank Coordinate, Bank

Guarantee, Bank Statement for Promissory Notes,

Promissory Note, Certificate of Inheritance and

Mandate, Confirmation Letter, Confirmation of Bank

Guarantee, Custodian Safekeeping Certificate, Proof

of Fund, Proof of Gold, Safekeeping Receipt,

Verification Letter and Acknowledgment Letter.

By such immaterialization, at the request of the

owner or the authorized person (by legal mandate) to

pledge the collateral goods may borrow money or

credit of a financing or banking institution. This

guarantee is what is meant by cash collateral derived

from immaterialization of collateral object. Another

term that can be used for immaterialization is the

giralization because the immaterialization result is

entered into the issuing bank's checking account.

Thus, immaterialization is basically a digitization

because of the numbers (not currency).

The immaterialization of material security to cash

collateral is an analogy with the issuance of money by

the Central Bank. The difference is that the money is

issued by the Central Bank and can be disbursed and

transferred while cash collateral is issued by a bank

and cannot be cashed but can be overbooked. For the

future, cash collateral can be functioned as a security

and can be equated with demand deposit.

The problem arising from the collateral cash,

collateral in the form of the figures is how the issuing

bank can guarantee interbank loans regions, even

between countries? To answer this question, it needs

to be discussed about the Society Worldwide

Interbank Financial Telecommunication (SWIFT).

In the face of developments in the financial

system and global guarantees supported by the

international banking telecommunication system,

Banking and Security Laws in the National Legal

System should develop a guarantee digitization

system through the International Financial and

Guarantee System that has implemented the

Worldwide Interbank Financial Telecommunication

System international financial guarantee

transmission. SWIFT as an international organization

that operates telecommunication networks for

uniformity of banks worldwide.

Security and validity of news in traffic among

members is what distinguishes SWIFT by other

means such as public network or telex. SWIFT has

the utility as a verification system in the banking

world in order to provide a legitimacy of bank

guarantees that are used as the main guarantee for

parties conducting business transactions or for the

fulfillment of the requirements of a project or

business capital assistance, as well as an instrument

that can be executed because it has economic value as

transferable trading object.

Based on banking procedures, in the practice of

bank guarantees, transactions are conducted through

global financial messaging service provider

organization, SWIFT, which has an important role in

balancing the development of the financial industry

so that the challenges of financial services sector

preparedness for each member of the SWIFT user

country. Bank guarantees are in practical terms as

banking instrument that cannot be separated in

regulating the flow of guarantee payments between

the financial institutions of each country. Until now,

bank transfers are made through SWIFT in

collaboration with the user community and have

standardized the exchange of messages by

organizations conducting financial business.

In international businesses that use bank

guarantees as a tool for transactions using SWIFT,

this can be seen as a great opportunity for fellow

business people to share information about best

practices in the industry and agree on the best way to

work especially in non-competitive spaces to meet the

demands of the financial sector in Indonesia.

The owner may apply for the issuance of Bank

Guarantee based on the cash collateral mentioned

above. Furthermore, under SWIFT mechanism, Bank

Guarantee can guarantee bank credits from countries

that are members of SWIFT. In the event of default of

loan or credit, debiting the cash value of cash

collateral by means of transferring finance from the

cash collateral account of the owner at the bank

issuing Bank Guarantee to the lender bank or loan.

Bank guarantee warranty system is done through

Message Type (MT) code in SWIFT transmission; in

bank transaction guarantee process is through SWIFT

MT 799. MT 799 is pre advised that the format using

the prefix code number "7" as the first notification to

transact and also explains the existence of funds that

guarantee bank guarantee. Then the MT 799 format

may be used by the receiving bank for the purpose of

being verified so that everything contained therein

shall be in accordance with the interests of the first

beneficiary.

After receiving bank receives MT 799 then follow

up by sending reply MT 199 as a form of willingness

and instruction to issuing bank to send MT 760 which

is the second transmission from bank guarantee

delivery. MT 760 is a proof of binding guarantees of

bank guarantee that can be used in following up the

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banking transaction process, especially in the

guarantee of funds, so that the recipient bank can

immediately provide or disburse funds, so that the

recipient bank can immediately provide or disburse

funds to the beneficiary after the final verification by

sending MT 199 or MT 999, then all liabilities can be

met and it is known that the bank blocks the funds or

assets and has a value of more than the nominal

amount listed in the bank guarantee.

4 CONCLUSIONS

Based on the description in problem identification

and discussion, it can be concluded that Performance

Guarantee can be used as solution of bank guarantee

problems in Indonesia in the framework of

development of guarantee law in Indonesia.

For a company that becomes a debtor customer,

with the assurance of this performance, it will be

triggered to improve the performance and health of

the company. In addition, the company will focus on

working in accordance with its core business because

it is not burdened by the security affairs.

Guarantee on the Right of Islands Watershed

Management in Indonesia is feasible as a new

Paradigm of the Guarantee Law in Indonesia because

the archipelagic islands are the continuation of the

land as a whole. In addition, this guarantees support

the development program based on maritime.

The rationale for digitalization as the basis of

electronic guarantee in Indonesia is the physical

condition of Indonesian state geography consisting of

thousands of islands that needs national and

international guarantee system. In addition, the rapid

advancement of digital technology can be used to

support the implementation of the National and

International Guarantee system.

In this study, the author suggest to the

Government of the Republic of Indonesia, in this case

the Ministry of Law and Human Rights to change the

paradigm of the legal system of guarantee, that is the

high level of performance and the health of the

company that becomes the debtor customer is more

important than the great sacrifices of money, and the

mind to provide assurance.

The second suggestion is given that the guarantee

of the Right Watershed Management Rights of the

Islands is only appropriate for large business actors

capable of realizing the guarantee in the broad sense,

high performing companies, national and

international reputations and a healthy company; it is

necessary to set minimum level of Government

Regulation.

Finally, given the final result of the

immaterialization of this asset in the form of

belligerent account numbers, digitizing becomes very

important. The government needs to make reliable

Electronic Assurance System regulations in

accordance with applicable ITE legislation. The

system should be integrated with the international

guarantee system, e.g. SWIFT.

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