Principles of the Governance System

Based on the mandate of Act Number 4 of 2023 concerning Financial Sector Development and Strengthening (P2SK Act), as well as the concepts and practices of central bank governance, the Principles of the Bank Indonesia Governance System are Independence, Consistency, Coordination, Accountability and Transparency (IKKAT) as follows:

1. Independence is reflected in the implementation of BI duties and authority free from conflicts of interest or third-party interference, unless otherwise stated for specific purposes in prevailing laws. The principles of Bank Indonesia independence are realised through five types of independence, namely goal independence, policy and instrument independence, functional independence, financial independence and personal independence.
   
   1. In terms of policy governance, Bank Indonesia's goals are enshrined in law, with various targets, such as the CPI target, set by the Government. Notwithstanding, Bank Indonesia enjoys goal independence to set its own policy goals and targets. Policy and instrument independence is realised when formulating the main policy mix and instruments deployed to achieve the policy mix targets, supported by independence in terms of implementing and operationalising the main policy mix, and independence in determining the policy budget.
      In the policymaking process, all Members of the Board of Governors (ADG) and employees of Bank Indonesia benefit from independence and reserve the right to reject any form of interference. Considering that achieving the goals of Bank Indonesia requires policy synergy with other authorities, however, coordination is necessary to maintain policy synergy based on mutual independence.
      
   2. In terms of institutional governance, Bank Indonesia enjoys goal independence in terms of setting the indicators and targets for institutional performance. Bank Indonesia is also independent in terms of formulating its institutional policy mix and instruments, supported by policy and instrument independence, as reflected by functional independence, among others, to achieve the goals in accordance with the duties and authorities of Bank Indonesia. Financial independence in the context of institutional governance is reflected in the management of Bank Indonesia's assets that is independent from the State Revenue and Expenditure Budget (APBN). Bank Indonesia is not fully financially independent, however, because the operational budget must be prepared and managed based on approval by the People’s Representative Council (DPR).
   
   
2. Consistency is reflected in the calibrated implementation of Bank Indonesia’s duties and authority in accordance with the mandate, norms, rules, as well as prevailing laws and regulations and/or procedures. The principles of consistency include policy consistency, system consistency and legal consistency. In general, the principles of consistency within the BI policy and institutional governance framework are applied as follows:
   1. In terms of policy governance, policy consistency is achieved by implementing the functions, duties and authority of Bank Indonesia based on the Main Policy Mix Framework (BKU), which is aligned with the legal mandate as well as prevailing rules and norms.
   2. In terms of institutional governance, consistency is achieved by implementing institutional management based on the Institutional Policy Mix Framework (BKK), which is aligned with the legal mandate and sound business practices.
   3. In addition, the principles of consistency as applied in terms of policy and institutional governance are achieved by implementing the function, duties and authority of Bank Indonesia, which is based on an integrated planning and control system that considers risk factors and the measured use of resources (system consistency). Integrated systems aim to ensure that the functions and authority of Bank Indonesia are implemented consistently with the existing policy framework, in harmony and synergy with different policies and functions, while maintaining time consistency.
   4. The concrete application of legal consistency principles in terms of policy and institutional governance is achieved by formulating various regulations and guidelines to provide a solid legal basis for the implementation of Bank Indonesia's duties and authority in accordance with prevailing laws and regulations.
   
   
3. Coordination with internal and external stakeholders is pursued through Bank Indonesia policy and institutional governance. Coordination aims to ensure harmony and alignment between various interrelated Bank Indonesia policies as well as with national policy:
   1. In terms of policy governance, internal and external coordination are implemented in the policymaking process to ensure synergy between Bank Indonesia policy and national policy, while also seeking inputs and/or support for Bank Indonesia policy implementation, including relevant initiatives and work programs.
   2. In terms of institutional governance, coordination is mainly pursued with internal stakeholders, primarily between relevant work units, in the formulation and implementation of institutional policies in the context of Bank Indonesia institutional policy synergy, as performed by various relevant work units, while also seeking inputs and/or support for Bank Indonesia institutional policy implementation, including relevant initiatives and work programs. If required, Bank Indonesia can consult with external parties to obtain inputs and/or information relating to Bank Indonesia institutional policy.
   
   
4. Accountability, as reflected in accountability to stakeholders regarding the implementation of duties and authority as well as the achievement of Bank Indonesia's goals in accordance with prevailing laws and regulations. The principles of accountability consist of policy accountability, financial accountability and institutional accountability. In general, the principles of accountability are implemented at Bank Indonesia as follows:
   1. The principles of policy accountability are primarily implemented in policy governance, where Bank Indonesia is accountable to the public at large for the policies instituted in pursuit of the duties, function, authority and goals of Bank Indonesia as mandated in prevailing laws.
   2. The principles of institutional accountability are primarily implemented in institutional governance, where Bank Indonesia is accountable for the implementation of organisational management, resource support, institutional governance and the operational budget to the People’s Representative Council (DPR).
   3. Meanwhile, the principles of financial accountability are implemented through financial management accountability to the People’s Representative Council (DPR) by submitting the financial statements of Bank Indonesia.
   
   
5. Transparency, as reflected in the disclosure of relevant important information with broad implications for the interests of Bank Indonesia’s stakeholders, without reducing the obligation to comply with prevailing information privacy laws. The principles of transparency include policy transparency, institutional transparency and financial transparency. In general, the principles of transparency in terms of policy and institutional governance are implemented as follows:
   1. Policy transparency is primarily implemented in policy governance, which is realised through public disclosure of the policies taken, including the frameworks, directional strategic policies, decisions, operationalisation and policy outcomes. This is in line with the principles of policy accountability, where Bank Indonesia is accountable to the public at large.
   2. Institutional transparency is primarily implemented in institutional governance, which is realised through disclosures in terms of institutional management, resource support, institutional governance and implementation of the operational budget to the People’s Representative Council (DPR). This is in line with the principles of institutional accountability, where Bank Indonesia is accountable for institutional management to the People’s Representative Council (DPR).
   3. Financial transparency is implemented through financial disclosures by publishing the Annual Financial Statement of Bank Indonesia, as a sound business practice.