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Regulatory Obligations in Indonesia’s Banking Industry: A Focus on Foreign Loan Obtainment

In light of recent economic developments, Indonesian authorities have emphasized the importance of implementing robust regulatory frameworks to ensure stability and confidence in the banking industry. The Financial Services Authority (OJK) plays a crucial role in overseeing banks, working closely with other government institutions such as the Financial Transaction Reporting and Analysis Centre (PPATK) and the Indonesian Deposit Insurance Institution (LPS).

Government Guarantee on Deposits

In response to the 1998 monetary crisis, the Indonesian government introduced a guarantee over deposits mechanism, insuring deposits up to a maximum of IDR 2 billion per customer. The LPS has since taken over this role, ensuring that customers’ deposits are protected in the event of bank failures.

Transactions between Affiliates

Regulatory limitations apply to transactions between banks and their affiliates, with the maximum limit for total loan portfolio granted to related parties set at 10% of a bank’s capital. The term “related party” is defined broadly to include individuals, companies, or legal entities exercising control over the bank.

Regulatory Challenges

Indonesia faces several regulatory challenges in the banking industry, including:

  • Integrating international standards and recommendations from organizations such as the Basel Committee on Banking Supervision
  • Addressing the impact of the COVID-19 pandemic

Consumer Protection

Banks are subject to consumer protection rules under OJK Regulation No. 1/POJK07/2013, which requires banks to have an internal policy on settling consumer complaints. Banks must resolve complaints within 20 business days of receipt, with extensions possible in certain circumstances.

Future Changes

OJK is expected to focus on several key policies over the next few years, including:

  • Increasing the economic scale of the financial industry
  • Developing digitalization of financial products and services
  • Enhancing consumer protection

The authority also aims to narrow regulatory gaps between financial services sectors and promote the development of Islamic economics and finance.

Correct as of

The information above is accurate as of 18 February 2020.