Fintech-based lending in Indonesia grew rapidly in 2019. Various crowdfunding models (in particular, peer-to-peer lending) emerged and gave the regulatory authorities a new focus for their attention. In this regard, the Financial Services Authority issued a number of new regulations concerning equity funding, digital financial innovation in the financial services sector, standing facilities, money markets and open operations.
Bank Indonesia recently issued an umbrella regulation on the application of prudential norms. As with the now revoked Regulation on Offshore Loans in the Banking Sector (as amended), Regulation 21 stresses the importance of compliance with prudential norms for maintaining macroeconomic and financial system stability. However, while the previous regulation's scope was confined to offshore bank loans, Regulation 21 encompasses "offshore bank debt and FX-denominated other bank liabilities".
Until recently, the Financial Services Authority (OJK) had never issued an overarching regulation governing the development of the fintech sector as a whole or replicating the sandbox regime and pre-audit mechanism established by Bank Indonesia for fintech in the payments arena. This gap has now been filled by OJK Regulation 13/POJK.02/2018 on Digital Financial Innovation in the Financial Services Sector.
After nine years of regulating e-money transactions, the Indonesian Central Bank has responded to changes in technology by replacing the previous e-money regulation. The issuance of the new regulation has significantly changed the e-money landscape, as it applies to all licensed e-money players and prioritises consumer protection by requiring minimum capital and the placement of floating funds.
The new Financial Services Authority Regulation on the Single Presence Policy in Indonesian Banking was issued in July 2017. The policy aims to ensure that a single entity does not simultaneously hold a controlling interest in more than one bank. Therefore, a controlling shareholder of more than one bank is required to merge or consolidate its controlled banks, establish a bank holding company or establish a holding function.
The Financial Services Authority (OJK) has introduced rules for the employment of expatriates and the transfer of knowledge in the banking sector, pursuant to which it has taken over the supervisory role previously performed by Bank Indonesia. Therefore, in order to employ an expatriate, a bank must now obtain OJK approval and submit reports on its expatriate staff. An expatriate's work permit will be processed by the Ministry of Manpower only after having been approved by the OJK.
New regulations require the banking and finance industries to comply with heightened supervision by financial authorities and will be welcomed by foreign investors and customers concerned with Indonesia's financial stability. Key developments include intensifying reporting obligations for systemically important banks, introducing tiered supervision and raising safeguard measures.
To support the development of a technology-based financial industry in Indonesia, the Financial Services Authority recently issued Regulation 77/POJK01/2016 regarding technology-based fund-lending services. The regulation is designed to protect consumer and national interests, while at the same time provide opportunities for local providers of financial technology to grow and contribute to the national economy.
Bank Indonesia (the Indonesian central bank) has issued a regulation and accompanying circular letter governing the mandatory use of rupiah for all cash and non-cash transactions. In prescribing the mandatory use of rupiah – with certain exemptions and special considerations – the regulation and circular letter apply the territoriality principle that underlies many of Bank Indonesia's other regulations.
Bank Indonesia has issued a regulation concerning the mandatory use of the rupiah within Indonesian territory, which applies to cash transactions as of March 31 2015 and non-cash transactions as of July 1 2015. However, there are a number of issues on which the regulation is less clear than might have been hoped.
With the introduction of the new Banking Bill in Parliament, the Indonesian banking industry is set to enter a new phase. Unlike the existing law, the new bill is clearly underpinned by a spirit of nationalism, stressing reciprocal treatment of Indonesian banks operating in other countries and requiring the financial authorities to ensure this reciprocity at home.
The newly established Financial Services Authority recently issued a set of regulations governing the financial services industry. The regulations are intended to promote sustainability, stability and competitiveness in light of the increasing complexity of transactions and interactions between financial institutions, as well as between companies within a financial conglomerate.
The Indonesia Deposit Insurance Corporation (LPS) recently issued the new Regulation on Procedures to Sell Shares of Failing Banks, which replaces the previous regulation. The new regulation provides clearer and more thorough information regarding procedures to sell shares of failing banks. Among other things, the new regulation requires the LPS to sell all shares of rescued banks.
As a reaction to the volatility of the rupiah over the past year, Bank Indonesia has issued a new regulation on hedging transactions. The regulation is expected to encourage the use of derivatives as a tool to hedge foreign currency exposure, and subsequently to reduce foreign currency spot transactions and ease pressure on the rupiah.
The Indonesian central bank, Bank Indonesia, has issued two regulations that will change the way in which banks in the country do business. The regulations govern the business activities of banks on the basis of their capital. As a result, commercial banks which in the past had more freedom in their operations are now limited to undertaking business transactions that are in line with their capital strength.
Bank Indonesia has issued the updated Regulation on Single Ownership in Indonesian Banks in an attempt to improve the competitiveness of Indonesia's banking industry in light of economic development at regional and global levels by reducing the number of Indonesian banks through consolidation. This policy is commonly known as the 'single presence policy' and was first introduced by Bank Indonesia in 2006.
After heated debate among regulators and politicians on what was seen as unhealthy concentrated ownership of banks by groups of companies – particularly foreign groups of companies – Bank Indonesia, the country's central bank and industry regulator, has issued the Regulation on Ownership of Shares in Commercial Banks, which restricts ownership of banks by individual shareholders.
Parliament's long-awaited approval of the Bill on the Financial Services Authority is one of the most significant developments in the history of Indonesian law and will change the landscape of the country's financial industry. It not only establishes a new financial services authority, but also positions this new body as the main regulator and supervisor of Indonesia's financial sector.
In light of the current financial instability, Bank Indonesia has recently issued three regulations in an effort to make Indonesian exporters deposit their export revenues into banks in Indonesia. They include the requirement that stipulates that all foreign exchange export proceeds be received and deposited by the exporter in a foreign exchange bank.
The new Currency Law is likely to have a major impact on Indonesia's payment systems and in the fields of trade and finance due to its requirements regarding the use of rupiah for payments. Its controversial prohibition of foreign currency for domestic payments appears to catch Indonesian subsidiaries and branches of foreign companies, including foreign-owned companies and bank branches.