Indonesia: Banking Supervision for Financial Stability
Challenge
Amid rapid changes in financial systems, Indonesia’s supervisory and regulatory frameworks must keep up with the pace of change. The country’s financial stability will be enhanced by strengthening its banking supervision and systemic-risk monitoring.
Approach
The IMF’s program, supported by the Japanese Government, aims to encourage the convergence and harmonization of supervisory practices with international standards and good practices to set a strong foundation for the expansion of financial intermediation and increasing regional financial integration. The IMF has assisted the Indonesian Financial Services Authority (OJK) since January 2015 to develop and strengthen the conglomerates supervisory framework.
Impact
The program enhanced OJK’s integration progress and supervisory capacity. OJK’s oversight now focuses on financial conglomerates (FCs), which are largely bank-dominated. With frequent interaction and training sessions, the authorities have heightened their awareness of risks to regulated financial institutions and on Indonesia’s financial system stability.
OJK now has three significant regulations in place that specifically deal with integrated risk management, integrated corporate governance, and integrated capital requirements of the conglomerates.