In an increasingly interlinked, globalised world, all countries are ultimately vulnerable to financial crises. History shows that economic crises have existed since at least the third century and the era of the Roman Empire. Since this ancient epoch, economic crises, depressions, and recessions have swept across the world on a regular basis, regardless of the economic power and status of any individual country. In Indonesia, financial crises have thrown the country into turmoil on a number of occasions since it first gained its independence in 1945. Indeed, the domino effects which ultimately resulted from the three large-scale financial crises faced by Indonesia in 1963 (national hyperinflation), 1997 (Asian financial crisis), and 2008 (United States subprime crisis) reveal quite clearly that the country is as prone to financial turbulence as any other, both as a result of domestic and external factors.
 
Past financial crises, however, must also be seen as valuable learning experiences which can be drawn from in order to improve the competency and management of the national financial sector. With the ultimate goal in mind of stabilizing the national economy and establishing various modern financial oversight authorities, eight years ago the government issued Government Regulation in Lieu of Law No. 4 of 2008 on the Financial System Security Net (“2008 Regulation”). However, in 2009, the House of Representatives (“House”) refused to pass the 2008 Regulation into law. The reason for this rejection was that the 2008 Regulation left no room for public control and input as regards any government action taken in order to resolve a potential financial crisis. The view was that this could lead to abuses of power.[1]
 
In the wake of the rejection of the 2008 Regulation by the House, the government eventually formulated the Draft Bill on the Financial System Security Net (“Draft Bill”)[2] which was included in the 2015 National Legislation Program. After a lengthy legislation process overseen by Commission XI of the House, the Bill on the Prevention and Control of Financial-System Crises (“Bill”) finally passed during the Third Plenary Session of the House, which was held on 17 March 2016.[3]
 
The Bill mandates for the establishment of The Financial System Stability Committee(Komite Stabilitas Sistem Keuangan – “KSSK”), as a first line of defense as regards the detection and management of any potential financial crisis. Furthermore, the Bill also sets out the scope of the KSSK’s authority, as well as the various steps which are available for the body to take in the carrying out of its duties.
 
This week’s Indonesian Law Digest (ILD) will analyze and discuss various issues relating to the mechanisms put in place by the Bill in order to prevent and control financial crises in Indonesia. Our analysis will confine itself to the following topics: