The general public not only demand a sound and solid banking industry but one that also plays and effective and efficient role in financing the economy. The creation of a sound and solid banking industry is inseparable from a banking sector that can effectively and efficiently perform its intermediation function. Additionally, the banking industry must continuously strive to enhance its competitiveness, especially in the face of very real future challenges like the inauguration of the ASEAN Economic Community in 2015.

With a view that future macroeconomic management will continue to confront global risks and increasingly complex domestic issues, the orientation of Bank Indonesia policy in 2012 will be directed towards the following:

1. Optimising the role monetary policy plays in boosting economic capacity while mitigating the risk of an economic slowdown.
2. Enhancing banking efficiency in order to optimise its economic contribution, while simultaneously underpinning bank resilience.
3. Improving the efficiency, reliability and security of the payment system, in terms of the national payment system as well as linkages with payment systems overseas.
4. Strengthening macro resilience by improving coordination for crisis prevention and resolution (PMK).
5. Bolstering the real sector, including financial inclusion.

In 2012, monetary policy will be directed towards financial sector stabilisation as well as anchoring a consistent BI rate to efforts of optimising economic stimuli, while paying due consideration to the inflation target.

The interest rate response will be oriented towards achieving the headline inflation target of 4.5% ±1% in 2012 and 2013, while maintaining economic momentum and mitigating the risk of a global economic slowdown. This interest rate policy will be complemented by macroprudential policy to mitigate vulnerability in consumptive sectors, for which growth is unsustainable or that contain potential asset bubbles.

The monetary policy operation strategy will continue to preserve interest rate stability on the rupiah money market, support exchange rate stability and foster financial market stability. In my opinion, this form of stability needs to provide greater opportunity for national financial market deepening.

Consequently, monetary operations will manifest in instruments that can directly catalyse transactional activity on the money markets, among others, the interbank money market, repurchase agreements (Repo) and swap. As a result, this will drive healthier and more efficient bank liquidity management. Bank Indonesia is also aware of the need for measures to continue the re-alignment process of the interest rate structure on the financial markets through a number of refinements to open market operations.

The exchange rate policy instituted by Bank Indonesia will continue to be oriented towards maintaining exchange rate stability while concomitantly paying due regard to internal and external economic balance, as well as providing assurance to economic players. From January 2012, exchange rate stabilisation policy will be supported by the implementation of policy concerning the receipt of export proceeds (DHE) and foreign exchange from external debt (DULN) at domestic banks. Bank Indonesia is also currently reviewing regulations to enrich instruments on the foreign exchange market in order to encourage hedging.

To control regional inflation, Bank Indonesia will optimise the function of Bank Indonesia Offices (KBI) as facilitators and catalysts of regional development, especially in eastern Indonesia where growth disparity remains widespread. KBI will be encouraged to effectively pursue their function by strengthening relationships with local government. Looking ahead, the task implementation of TPID (Regional Inflation Control Teams) will be buttressed by an information system for strategic goods’ prices, in particular covering information concerning national production and inventory. To this end, strong commitment and support is required from a number of sides, including the Ministry of Agriculture and Ministry of Trade, as well as from local government

Banking policy will be directed towards maintaining an optimal balance between boosting competitiveness and strengthening bank resilience, while continuing to encourage bank intermediation and broadening public access to low-cost banking services.

In order to ameliorate banking competitiveness, the prime lending rate policy will be continued to ensure market mechanisms operate smoothly and, hence, policy targets are accomplished. As a follow-up measure within the sphere of banking supervision, mandating the inclusion of efficiency and lending rate targets in the bank business plan will improve the enforcement of regulations. Bank Indonesia is also reviewing the practice of offering higher deposit rates than those set by the Deposit Insurance Corporation (DIC), as well as reviewing restrictions on rewarding customers.

Policy to strengthen banking resilience is achieved by raising capital in order to buoy future economic growth and anticipate changes in the business cycle. Through this policy, banks in Indonesia will be better prepared to anticipate the array of risks faced, which can be covered by adequate capital.

Aspects of customer protection and banking governance require greater attention. Several prominent cases of fraud in the banking sector during 2011 highlight the need to review customer protection and banking governance policy. Consequently, in 2012 Bank Indonesia will continue measures to enhance aspects of customer protection and the protection of potential customers.

In order to augment the quality of banking governance, Bank Indonesia will amend regulations relating to financial statement transparency, particularly the publication of financial statements, as well as the requirements for public accountants used by banks. Bank Indonesia is also reviewing bank ownership policy and multi-licensing in line with the increasing complexity of bank business activities.

In addition to aspects of banking competitiveness and resilience, Bank Indonesia will also encourage the bank intermediation function through a number of measures as follows:

1. Continue efforts to broaden public access to low-cost banking services (financial inclusion) in rural areas, including improving the TabunganKu (MySavings) program, developing financial education as well as implementing Financial Identity Numbers and conducting financial literacy surveys.
2. Facilitate bank intermediation to support financing in several sectors with the potential for government agency cooperation. In addition, the most binding constraints to financing in sectors with relatively low credit growth will be reviewed. In relation to the financial needs of sectors that are not commercially attractive to the banking industry but play a strategic role in the economy, Bank Indonesia in conjunction with the government will develop several financing schemes.

Efforts to enhance competitiveness and governance will also constitute the orientation of Islamic banking policy. In addition, Islamic banking products and activities will be further developed. Looking ahead, the development strategy for Islamic rural banks (BPRS) will be directed in congruence with the characteristics of such banks as community banks that are sound, solid, productive and focused on providing financial services to MSME and the public in rural areas.

As with the banking industry, which is expected to lower economic costs, financial services are also presumed to strive towards a similar goal. Financial services comprise of the payment system we already know, cash and non-cash, as well as settlement (transaction settlement).

Bank Indonesia is determined to take a leading position in setting future policy direction for the development of payment services. Policy coordination between agencies and authorities will continue to be needed, especially due to the involvement of many parties external to the central bank in developing payment services. Future development of the national payment services industry will be achieved through several efforts as follows:

1. First, enhancing the security and reliability of payment services through the application of risk mitigation, including the utilisation of technological advancements, strengthening the legal framework, reinforcing supervision and expanding the role of the national payment services industry;
2. Second, boosting the efficacy of national payment services, including the creation of interoperability and interconnectedness among the operators of payment services.
3. Third, improving consumer protection through greater transparency by payment services providers, as well as strengthening regulations concerned with consumer protection.

A variety of national payment services development programs are detailed in the blueprint, which is integrated in the guidelines to create and maintain a payment system that is efficient, secure and reliable.