RUU PPSK: Striving for Indonesia’s Financial Advancement

The Republic of Indonesia's House of Representatives (DPR) approved the Draft Law on Development and Strengthening of the Financial Sector (PPSK) to immediately be implemented on Thursday (12/15). The approval of the PPSK Law took place at the 13th DPR RI plenary meeting for the second trial period for the 2022-2023 period. The government was represented by the presence of the Minister of Finance, Sri Mulyani Indrawati stating a final concluding speech along with the Minister of Investments, Bahlil Lahadalia to accept this final draft. Sri Mulyani expects this law to reform the financial sector and increase Indonesia’s economic resiliency in the global stage. She hopes that it would bring momentum to recover the economy post COVID-19 pandemic and increase social welfare. In accordance with its main objectives, the law is also expected to provide legal certainty for consumers in the financial sector in Indonesia. With hopes that the financial sector in Indonesia can increase their fairness and lead to positive effects for the greater population. The Minister of Finance Sri Mulyani previously stated during a meeting on the PPSK Law with Commission XI DPR on Thursday (12/8) that the financial sector is a business based on trust, without trust the financial sector will be stunted. Consequently, faith is an essential factor in the financial industry and this is the responsibility of the DPR and the government to be able to formulate the PPSK law. The main points of financial sector reform in the PPSK Law will cover institutional authorities and financial system stability in the framework of strengthening the financial system safety net and developing and strengthening the industry.

The PPSK Law or omnibus law on the financial sector initiated by the government contains 341 articles. A number of articles regulate new matters in the financial sector, ranging from digital rupiah to oversight of crypto assets by the Financial Services Authority (OJK). According to Tempo and CNN, there are at least five points that are crucial in this new law. First one being the regulation of Rupiah Digital or Indonesia's CBDC by Bank Indonesia regarding the utilization of technological advancements and consumer protection. Second, digital assets such as crypto and its transactions to be regulated by OJK, which is carried out to further regulate and supervise digital financial assets in terms of protecting investors. Third, added duties for the Deposit Insurance Corporation or Lembaga Penjamin Simpanan (LPS) in protecting public funds in insurance companies, carrying out bank resolutions to formulate, determine, and implement bank resolution policies designated as banks in resolutions, and carry out settlement of insurance companies which business licenses had been revoked by OJK. Fourth, allowing Bank Indonesia to buy Government Securities (SBN) on the primary market during a crisis to prevent systematic collapse of the financial system and save the economy. Lastly, the government has also decided to add two members to the OJK Board of Commissioners to regulate crypto and venture capital in Indonesia. The two additional will become Supervisors for Financial Sector Technology Innovation and Supervisors for Financing Institutions.

Formulated to refine the already-existing policies, the newly passed law is believed to become Indonesia’s new financial system reformation touchstone. Financial Services Authority (OJK) Chairman Mahendra Siregar postulated that the financial services industry in Indonesia will contribute more to Indonesia's economic growth through this regulation. Additionally, he conveyed that the players in the financial services industry were enthusiastic about the new policy in view of the fact that it opens an even bigger door for the financial services industry to further contribute to the nation’s monetary stability as well as economic growth. On top of that, as the institution responsible for the financial services sector, OJK Deputy Chairman Mirza Adityaswara alluded that granting investigative authority to OJK is a positive step. With a more in-depth understanding of the technical aspects of the financial sector, the body is believed to competently carry out investigations in a more well-structured manner. In an attempt to support Indonesia’s promising outlook, RUU PPSK also has an article related to innovation, governance, and risk management in the Financial Sector Technology Innovation (ITSK) - projected to further stimulate the digital financial sector in Indonesia. OJK forecasted that the growth of the fintech sector and digital economy could increase Indonesia’s GDP to Rp24.000 trillion by 2030 due to this law. With numerous grounds covered, the approval of the new multilayered Omnibus Law is envisioned to increase the resilience of the Indonesian economy in facing global conditions.

Sources:

Bisnis Tempo

CNBC Indonesia

Kementerian Keuangan RI

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