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Indonesia’s Financial Regulatory Landscape
The financial regulatory landscape in Indonesia is complex, with two main authorities responsible for overseeing various aspects of the sector: Bank Indonesia (BI) and Otorita Jasa Keuangan (OJK).
Licensing Requirements
The OJK is responsible for issuing licenses to individuals who represent securities companies in performing their services. These licenses are required for representatives of broker dealers, underwriters, investment managers, and mutual fund agents.
To obtain a license, individuals must provide evidence of certification by a professional body recognized by the OJK. This includes proof of membership in organizations such as the Indonesian Stock Exchange or the Indonesian Clearing and Guarantee Corporation.
Fintech Regulation
The fintech sector is subject to a separate regulatory regime, which allows companies to operate before being recorded with BI or OJK. Once recorded, these companies will be required to undergo a regulatory “sandbox” process, during which their activities will be monitored to ensure compliance with prevailing laws and regulations.
Legislation
Bank Indonesia was established in 1953 as the central bank of Indonesia, but it was not involved in monetary policy until 1968. The OJK was established in 2011 under Law No. 21 of 2011, which mandated its creation to oversee the banking sector.
The prime objectives of BI are to attain and maintain Rupiah (IDR) stability, and to remove inflation from its monetary policy regime.
Regulatory Framework
The main areas of regulation for financial institutions include:
- Scope of business activities and type of products
- Capitalization and shareholding requirements
- Licensing and registration
- Good corporate governance
- Level of soundness
- Fit and proper test requirements
- Data privacy and data protection
- Risk management
- Consumer protection
- Anti-money laundering and combating the financing of terrorism
Additional Requirements
Financial services firms and authorized persons may be subject to additional requirements imposed by self-regulatory bodies, designated professional bodies or other financial services organizations.
For example, peer-to-peer lending companies must comply with the code of conduct of the Indonesian Joint Funding Fintech Association, which includes rules on maximum interest rates and repayment periods. Similarly, securities trading in the capital market sector is subject to the policies, rules, and procedures of the Indonesian stock exchange, the Indonesian Clearing and Guarantee Corporation, and the Indonesian Clearing and Guarantee Institution.
Date
The information above is accurate as of 21 January 2021.