International financial crisis experience,
including in Indonesia, has taught authorities the importance of Crisis
Management Protocol (CMP). The definition of protocol is an accepted or
established system of rules clarifying the conduct and procedures in a
formal situation. Crisis Management Protocol (CMP) is critical within a
financial system for crisis resolution purposes by ensuring the
financial authorities can react and respond quickly through appropriate
and coordinated measures.
CMP in Indonesia is regulated in accordance
with Act No. 9 of 2016 concerning Financial System Crisis Prevention and
Handling, most recently amended by Act No. 4 of 2023 concerning
Financial Sector Development and Strengthening (UU PPSK).
The scope of CMP at Bank Indonesia covers
crisis prevention and handling measures, including the decision-making
process and coordination with the Government, Financial System Stability
Committee (KSSK) and/or other relevant institutions. CMP at Bank
Indonesia prioritises principles of good corporate governance, focusing
on crisis prevention and rapid handling measures, as well as effective
communication and coordination. Within that process, protocols are
implemented through coordination and the exchange of data and
information, while executing the decisions of the BoG Meeting,
evaluating the pressure status and policy response, as well as
communicating the crisis prevention and handling measures. All
inter-institutional policy frameworks and coordination protocols are
tested regularly through the National Crisis Prevention and Resolution
Simulation (Simkrisnas).
Regarding the handling of Financial System
Stability, in accordance with the mandate stipulated in the Financial
Sector Development and Strengthening Act (UU PPSK), during crisis
periods Bank Indonesia is authorised to:
-
Purchase long-term government securities
(SBN) in the primary market to resolve financial system issues that
pose a threat to the national economy,
-
Buy/reverse repo SBN held by IDIC to
fund the bank resolution costs, and
-
Provide access to funding for
corporations/private companies through repo (repurchase agreements)
for SBN held by the corporations/private companies via the banking
industry. ​
Financial System
Stability Committee
According to the Financial Sector
Development and Strengthening Act (UU PPSK), the mandate to prevent
and resolve financial system crises in the national interest and to
maintain the resilience of the national economy is executed by the
Financial System Stability Committee (KSSK), with institutional
members including the Ministry of Finance (Chairman), Bank
Indonesia, Financial Services Authority (OJK) and Indonesia Deposit
Insurance Corporation (IDIC). Each member acts for and on behalf of
the institution they lead in accordance with prevailing laws and
regulations. The Financial System Stability Committee is tasked with
coordinating the monitoring and maintenance of Financial System
Stability, implementing Financial System Crisis resolution measures
and coordinating the resolution of issues at systemic banks under
normal and crisis conditions.
The Financial Sector Development and
Strengthening Act (UU PPSK) regulates the role and authority of the
Financial System Stability Committee and the institutional members.
The roles and authorities are strengthened through the prevention
and resolution instruments for troubled banks, such as the bank
recovery and resolution plan, short-term liquidity assistance and
sharia short-term liquidity assistance, placements by IDIC,
strengthening the role of IDIC as the resolution institution and
risk minimiser, as well as strengthening
macroprudential-microprudential coordination and
macroprudential-microprudential resolution.​
