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Bank Indonesia Banking Regulations

4 min read|Last Updated: August 29, 2022|
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Before incorporating a company or living in a country, understanding its financial system is crucial as it supports the country’s economy which may affect the quality of life. If the country’s banks fail, it will cause problems for the people who live there as well as the businesses that have invested heavily in those banks.

Banks may fail if the bank’s management makes poor financial judgments or if enough money does not circulate within the economy. These circumstances may result in an economic collapse and, as a result, a long-term recession in the country where the banks are based.

As a result, bank regulation is essential to avoid such unfavorable scenarios from occurring. Bank regulation oversees the banks’ investment decisions. Bank regulations in a specific country also specify the minimum and maximum capital that banks must hold within a fiscal year.

In general, these laws assist banks to avoid any unforeseen failures. Regular audits and economic reforms essential for the banks’ improvement are also mandated by government legislation.

Laws Governing Indonesian Banks

In Indonesia, a number of rules control the operation of both international and domestic banks. The banking industry in Indonesia is regulated by Bank Indonesia (BI). It executes numerous monetary policies and ensures the rupiah’s stability.

Law No. 7 of 1992 governs banks in Indonesia, which has since been revised by Law No. 10 of 1998. Law No. 7 was enacted to encourage Islamic banking where commercial and rural banks can both operate on Islamic banking principles under Law No. 10. The monetary policy regulations are governed by Law No. 21 of 2011. It also controls and supervises banking institutions, monitors the solvency of banks, and conducts bank examinations.

The Bureau of Industry and Security (BI) has issued Regulation No. 14/24/PBI/2012, which addresses the Single Presence Policy (SPP). This rule increases the competitiveness of the Indonesian banking industry by improving supervisory standards and streamlining bank ownership.

In order to comply with this rule, banks in Indonesia must meet certain requirements. One of these requirements is that any foreign exchange obtained from exports must be received through an Indonesian foreign exchange bank within three months of receipt. Exporters must also disclose all export declarations for every export valued at more than $10,000 USD.

Authorities Responsible for Overseeing Indonesian Banks

The main authorities in charge of overseeing Indonesian banks are the Bank Indonesia (BI) and the Otoritas Jasa Keuangan (OJK). The OJK took responsibility of the regulatory and supervisory activities of Indonesia’s financial services sector in 2013 after passing Law No. 21 of 2011. The banking functions of BI are included in this area.

Indonesian banks are supervised by the Bank of Indonesia (BI) and are required to disclose international loans and foreign currency influxes to the BI. Aside from the BI and the OJK, there are a number of other authorities in Indonesia that are responsible for bank regulation, which are:

  • The Indonesian Deposit Insurance Institution (IDI) and the Financial Transaction Reporting

  • Analysis Center (PPATK)

The OJK, BI, PPATK, and LPS collaborate to keep a close eye on the many services of banks, including credit cards, foreign exchange, deposits, and withdrawals, among other things.

Common Violations of Bank Laws in Indonesia

Indonesia’s government has enacted a number of new banking-related regulations and has also begun to prosecute persons who break the new legislation.

Some of the common violations of bank laws in Indonesia include:

1. Exporters who do not keep foreign exchange gains from natural resources in Indonesian banks

Exporters must deposit their foreign exchange gains received from natural resources in Indonesian banks, according to current bank legislation in the country.

2. Carrying large sums of foreign currency while crossing the border

One of Indonesia’s banking rules currently prohibits the importation of foreign currencies on behalf of either Indonesians or foreigners. Some banks have even been accused of exposing depositors’ personal information. Banks are only allowed to reveal customer personal information when a government agency or court orders it.

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FAQs

What are bank restrictions?2021-11-22T13:10:07+08:00

Restricted Account Meaning. A bank account can be restricted in a variety of ways. A bank might limit how many transactions you can make, including making withdrawals, writing checks and making deposits. Businesses and nonprofits might restrict who can use their accounts or what the money is used for. 

Who regulates the banks in Indonesia?2021-11-22T13:09:32+08:00

OJK. Indonesian banking business is considered highly regulated and supervised by OJK. In terms of commercial banks, OJK through OJK Regulation No. 6 /POJK. 

How well-regarded are Indonesia’s banks internationally?2021-11-22T13:10:30+08:00

The global reputation of the banks of Indonesia has risen in recent times. This is because Indonesia has several leading banks that have placed Indonesian banks in the spotlight at the international level.

However, there are several problems faced by many banks in Indonesia which threaten to damage the global reputation of the country’s banks. One of these problem areas is that of foreign exchange rates. Foreign exchange rates in Indonesia are important because the country has nearly 15% of its loans in the form of foreign currency. Thus, to maintain the positive international reputation of Indonesia’s banks, the banks of Indonesia have to re-assess their strategies as foreign exchange rates change. Therefore, foreign banks, Indonesian banks, and the Indonesian government must work together in order to achieve the best possible outcome for the banks of the country. By doing so, they will increase the revenue and level of investment which enters Indonesia. This in turn will serve as a significant boost to the international reputation of Indonesian banks.

What are some details regarding banks in Indonesia?2021-11-22T13:10:35+08:00

Banks in Indonesia function on weekdays and Saturdays. Their opening hours are regulated by the country’s banking authorities. Usually, the opening hours of banks on weekdays are from 8am to 3pm. On Saturdays, they are usually 8am to 1pm.

Bank accounts in Indonesia can be opened in just one day. Those who have opened a bank account in Indonesia may either receive an ATM card or debit card on the same day that the account is opened. Before anyone can open a bank account at any major bank in Indonesia, a minimum deposit must usually be made. This minimum deposit is typically 500,000 rupiah or more.

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