- President Joko Widodo recently signed off on Law No. 4 of 2023 on the Development and Strengthening of the Financial Sector (“Law 4/2023”), which represents the results of an Indonesian Government and House of Representatives (Dewan Perwakilan Rakyat – “DPR”) initiative to advance public welfare through the reforming of the Indonesian financial sector.
- The push for the reforming of Indonesia’s financial sector through Law 4/2023 is becoming increasingly necessary in view of the various global challenges that are currently emerging, such as the pandemic, the geopolitical situation, the potential for recession across various regions, technological developments which altering the business models of various financial services and climate change. As a result, the overall stability of Indonesia’s financial system needs to be strengthened in order to deal with these global scenarios.
- According to Indonesia’s Minister of Finance, Sri Mulyani Indrawati, the government and the DPR have agreed on five matters that have now been regulated under the new framework of Law 4/2023, as follows: 1) Institutional strengthening of financial sector authorities while also taking into account the sector’s independence; 2) Strengthening of governance and efforts to increase public trust; 3) Encouraging the accumulation of long-term financial sector funds in order to support welfare and sustainable development financing; 4) Consumer protection; and 5) Financial sector literacy, inclusion and innovation.
- Overall, 27 chapters and 341 articles are stipulated under Law 4/2023, which will replace a total of 17 laws related to the financial sector. In comparison to its draft version that was passed on 15 December 2022, as discussed under ILB No. 4533, there is no substantial change made under Law 4/2023.
- Various indicators have shown the urgent need for the reform of the Indonesian financial sector, including the prevailing shallowness of the sector, intermediary roles in the financial sector which are not yet optimal and the low level of consumer protection currently available within the sector.
- Subsequent to the promulgation of Law 4/2023 by the president, the government and regulatory agencies operating within the financial sector will draw up a number of implementing regulations, including in the form of Regulations of the Government, Regulations of Bank Indonesia, Regulations of the Financial Services Authority (Otoritas Jasa Keuangan/OJK) and Regulations of the Indonesia Deposit Insurance Corporation (Lembaga Penjamin Simpanan/LPS).
- The aforementioned implementing regulations will be drafted within two years of the date of promulgation of Law 4/2023, i.e. 12 January 2025. In this regard, the government will work to ensure that the process of drafting these various implementing regulations is implemented in a credible manner through the involvement of various relevant parties, including the DPR, supervisors and the general public.
- For more on this story, see Hukumonline.com: “Presiden Tandatangani UU PPSK”.
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