History of Bank Indonesia

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Banking regulation and surveillance was moved to OJK

The People’s Representative Council (DPR) enacted Act No. 21 of 2011 concerning the Financial Services Authority (OJK), which transferred the bank supervisory and regulatory function from Bank Indonesia to the Indonesian Financial Services Authority (OJK). 

The law delineated the microprudential regulation and supervision function under the authority of OJK and the macroprudential regulation and supervision function under the responsibility of Bank Indonesia, with financial system stability as the target.


The affirmation of Bank Indonesia as the lender of last resort

The People’s Representative Council (DPR) enacted Act No. 6 of 2009 concerning the enactment into law of Government Regulation in Lieu of Law No. 2 of 2008, as the second amendment to Act No. 23 of 1999 concerning Bank Indonesia. 
The amendment clarified and affirmed Bank Indonesia’s function as lender of last resort (LOLR). 


Ratification of Bank Indonesia as an independent central bank

The People’s Representative Council (DPR) enacted Act No. 3 of 2004 as an amendment to Act No. 23 of 1999 concerning Bank Indonesia.

The amendment affirmed Bank Indonesia’s status as an independent central bank, refining regulations concerning the duties and responsibilities as well as the legal arrangements of the supervision function.


Act No. 23 / 1999 on Bank Indonesia

Bank Indonesia gained central bank independence in accordance with Act No. 23 of 1999.

Act No. 23 of 1999 also mandated a single objective to achieve and maintain rupiah stability, thus obviating the goals as an agent of development.

Since this period, Bank Indonesia has applied an inflation targeting framework within the monetary policy regime.
According to the ITF framework, BI credibility is based on its ability to achieve the inflation target predetermined by the Government.


Asian Financial Crisis

The monetary crisis that befell Asia in 1997 forced Bank Indonesia to implement extraordinary crisis resolution policy measures, including the introduction of a floating exchange rate regime, the closure of troubled banks and restructuring of unhealthy banks.​​


Banking Deregulation

Bank Indonesia issued a banking deregulation policy package, known as the 27th October 1998 Policy Package, otherwise known as Pakto 88 or Pakto 27.

The policies aimed to stimulate banking industry growth through less stringent licensing requirements for the establishment of a new bank.


Bank Indonesia as the agent of development and the treasury holder of the state

In accordance with Act No. 13 of 1968 concerning Bank Indonesia, Bank Indonesia was no longer permitted to disburse commercial loans, yet retained the functions as state treasurer and development agent.

Act No. 13 of 1968 returned Bank Indonesia's function as a central bank and terminated its status as BNI Unit I.
Through Act No. 21 and 22 of 1968, the other banks that merged under single presence policy were reinstated as standalone state-owned banks.


Bank Indonesia Established

In 1951, national fervour gained momentum for the establishment of a central bank as a form of economic sovereignty in the Republic of Indonesia.  Consequently, the Government decided to establish the DJB Nationalisation Committee.
The nationalisation process was implemented by the Government of the Republic of Indonesia purchasing 97% of DJB shares.
On 1st July 1953, the Government of the Republic of Indonesia issued Act No. 11 (Principal Act on Bank Indonesia), which superseded the DJB Act of 1922. On 1st July 1953, therefore, Bank Indonesia was officially established as the Central Bank of the Republic of Indonesia.
Act No. 11 of 1953 contained the first laws regulating Bank Indonesia as the central bank.
Bank Indonesia’s duties were no longer restricted to circulation activities but were expanded to include commercial banking activities by providing loans.

During this period, the Monetary Board (MB) was established to determine monetary policy. The MB was chaired by the Finance Minister, with the Bank Indonesia Governor and Trade Minister as members.  Bank Indonesia was subsequently tasked with implementing the monetary policy set by the MB.
During the Guided Democracy period, President Soekarno introduced the Guided Economy concept.  At that time, the Bank Indonesia Governor was a member of the Parliamentary Cabinet, known as the Minister of Central Bank Affairs, and the Monetary Board was disbanded.
In terms of banking, the Bank Berjoang Doctrine sought to unify all state-owned banks as single presence banks under the name Bank Negara Indonesia (BNI) in accordance with Presidential Regulation (Perpres) No. 17 of 1965.
During implementation of the Bank Berjoang Doctrine, Bank Indonesia became BNI Unit I, while the other state-owned banks became BNI Units II-V.


Republic of the United States of Indonesia (RUSI)

In 1949, one of the significant points of agreement during the Dutch-Indonesian Round Table Conference was Dutch cessation of sovereignty to the Republic of the United States of Indonesia (RUSI).

At the Round Table Conference, DJB was designated as the circulation bank of the United States of Indonesia.

After the Republic of Indonesia’s secession from the United States of Indonesia, DJB maintained its status as the circulation bank with the Dutch as controlling shareholders during the transition period towards the Unitary Republic of Indonesia.


Dualism in Indonesia

After the Proclamation of Indonesian Independence, the Netherlands endeavoured to retake power in Indonesia through the Netherlands Indies Civil Administration (NICA).

During this period, NICA re-established De Javasche Bank to print and circulate NICA currency, with the aim of disrupting the Indonesian economy.

In accordance with the written mandate stipulated in the elucidation of the 1945 Constitution, Article 23 “To that end, the authority of Bank Indonesia to issue and regulate currency in circulation is set forth in law”, the Government of the Republic of Indonesia established a circulation bank, namely Bank Negara Indonesia (BNI).

In an effort to maintain economic sovereignty, BNI issued currency known as Oeang Republik Indonesia (ORI).

The presence of BNI owned by the Republic of Indonesia and DJB owned by NICA created dualism between the circulation banks in Indonesia and triggered a currency war.  During this time, DJB banknotes became known as ‘red money’ and ORI as ‘white money’.


Dutch East Indies

In 1928, the Dutch Colonial Government issued a special charter (octrooi) to De Javasche Bank to become a circulation bank. During this period, DJB was authorised to print and circulate guilders in the Dutch East Indies.

The octoori was periodically extended every 10 years. In 1922, octoori had been extended seven times.  

In 1922, the Dutch Government promulgated the De Javasche Bank Act.


Japanese Occupation

De Javasche Bank was liquidated during the Japanese Military occupation. DJB’s function as a circulation bank was replaced by Nanpo Kaihatsu Ginko (NKG).​


Economic Liberalisation in Dutch East Indies

The Government promulgated Agricultural Laws (Agrarische Wet) that allowed private parties to invest capital in business sectors in the Dutch East Indies.

The plantation sector emerged in the Dutch East Indies as an important producer of commodities for international trade.

Ethical politics were introduced to empower the colonised people.

Credit banks were established to stimulate the local economy.

From 1870-1942, De Javasche Bank opened another 15 branch offices in strategic cities throughout the Dutch East Indies: Yogyakarta (1879), Pontianak (1906), Bengkalis (1907), Medan (1907), Banjarmasin (1907), Tanjungbalai (1908), Tanjungpura (1908), Bandung (1909), Palembang (1909), Manado (1910), Malang (1916), Kutaraja (1918), Kediri (1923), Pematang Siantar (1923) and Madiun (1928).


Dutch Colonial Economic Expansion

To restock a national treasury eroded by the Java War, the Netherlands introduced the Cultivation System (cultuurstelsel) in the East Indies.

The Cultivation System featured in a novel authored by Max Havelaar, which angered politicians and the Dutch populace.

From 1829-1870, DJB expanded its business operations by opening branch offices in a number of cities on the island of Java and elsewhere: Semarang (1829), Surabaya (1829), Padang (1864), Makassar (1864), Cirebon (1866), Solo (1867) and Pasuruan (1867).


Establishment of De Javasche Bank

Establishment of De Javasche Bank, which later became Bank Indonesia.

De Javasche Bank was the first circulation bank in Asia.


Bank Courant en Bank Van Leening

Closure of Bank Courant en Bank Van Leening due to a financial crisis.​


Bank Courant en Bank Van Leening

In 1746, Bank van Courant was the first bank established in the Indonesian archipelago to support trade activity. The bank was tasked with providing loans backed by gold, silver, jewellery and other precious commodities. 

In 1752, Bank van Courant evolved into De Bank van Courant en Bank Van Leening, mandated with extending loans to VOC employees in order to circulate money within the organisation with the promise of interest income.


Vereenidge Oost-Indische Compagnie (VOC)

VOC was established to open trade routes in the Indonesian archipelago and simultaneously expel the Portuguese (which failed).​


Trading Company

Vereenidge Oost-Indische Compagnie was established, otherwise known as VOC (The Dutch East India Company).

Spanish real entered the Indonesian archipelago.


16th Century

Arrival of Europeans to Southeast Asia on a mission to find spices. 

In Indonesia, established kingdoms were already using their own currencies. In addition, foreign currencies were also in wide circulation, including picis coins from China

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