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Indonesia’s Financial Regulation Landscape: A Comprehensive Guide

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JAKARTA, Indonesia - In a bid to strengthen its financial sector, Indonesia has established two key regulatory bodies - Bank Indonesia (BI) and Otoritas Jasa Keuangan (OJK). These institutions are responsible for overseeing the country’s banking and non-banking financial services sectors.

Regulatory Requirements

According to recent reports, BI may interview controlling shareholders or board members in connection with an application for a remittance licence. Similarly, individuals representing securities companies must obtain specific licences to perform their services. To support these applications, individuals must provide evidence of certification by a professional body recognized by the OJK.

Fintech companies are subject to a separate regulatory regime under both BI and OJK supervision. These firms may start operating before being recorded with the relevant authorities, but will be subject to a “regulatory sandbox” process that determines whether they can continue to operate without a specific licence or cease operations if deemed non-compliant.

Legislative Framework

BI was established as Indonesia’s central bank in 1953 and has undergone several transformations since then. The OJK, on the other hand, was established in 2011 under Law No. 21 of 2011 (Law 21/2011) to oversee the banking sector, which later expanded to include all financial institutions.

Key Laws and Regulations

The OJK is responsible for regulating financial services firms and their associated persons, while BI oversees monetary policy and the stability of the Indonesian rupiah. Financial services in various sectors, including banking, capital markets, insurance, microfinance, and pension funds, are governed by specific laws and regulations.

Scope of Regulation

The main areas of regulation for financial institutions include:

  • Scope of business activities and type of products
  • Capitalisation 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 also be subject to rules and regulations imposed by self-regulatory bodies, designated professional bodies, or other financial services organizations.

Correct as of

The information provided is accurate as of January 21, 2021.