Governance System Elements

Elements of the Bank Indonesia Policy and Institutional Governance System are the core aspects that must be implemented for the application of IKKAT principles in the day-to-day implementation of Bank Indonesia's duties and function. There are seven elements of the governance system as follows:

1. Clear Legal Mandate achieved by stipulating the clear status, goals, duties and authority of Bank Indonesia within the Bank Indonesia Act. This includes Bank Indonesia's clear status as the central bank of the Republic of Indonesia, an independent public institution and public legal body, as explicitly stated in the Bank Indonesia Act, most recently amended by the P2SK Act. In general, the clear goals, duties and authority of Bank Indonesia, as applied in policy and institutional governance, are as follows:
   
   1. In terms of policy governance, the clear goals, duties and authority of Bank Indonesia in the policy area are stipulated in the Bank Indonesia Act, most recently amended by the P2SK Act, which states the goals, duties and authority of Bank Indonesia concerning monetary policy, payment system policy and macroprudential policy, as well as other supporting policies.
      A clear legal mandate also includes the clear roles and responsibilities of Bank Indonesia in achieving the policy goals and targets, which requires coordination with other authorities (relating to financial system stability and sustainable economic growth, among others). A clear legal mandate also provides a solid legal basis for formulating and implementing Bank Indonesia policies, the coordination mechanisms implemented (including synergy between Bank Indonesia policy and national policy), as well as accountability.
      
   2. In terms of institutional governance, the elements of implementing a clear legal mandate are reflected in the provisions contained in the Bank Indonesia Act concerning Bank Indonesia's authority to implement institutional functions. Currently, the authority regarding institutional functions, which include organisational and resource management, are explicitly contained in the Bank Indonesia Act, most recently amended by the P2SK Act.
      Organisational management encompasses the authority for integrated strategic planning and control, as well as business process management at Bank Indonesia. Meanwhile, resource management deals with the authority for the management of Bank Indonesia's assets that is independent from the State Revenue and Expenditure Budget (APBN), the preparation and utilisation of the annual budget for operational and policy activities, human resource management, the management of work facilities and infrastructure as well as the management of digital innovation at Bank Indonesia.
   3. Implementing the elements of a clear legal mandate emphasises independence, clarifies accountability, ensures consistency and protects transparency in the implementation of duties and authority in accordance with Bank Indonesia's mandate, and underlies coordination with external stakeholders.
   
   
2. Policy and Strategy
   1. Applying the policy and strategy elements is reflected in the implementation of Bank Indonesia's duties and authority based on clear policy and strategy. Bank Indonesia policy and strategy consists of: (i) medium-term policies and strategies that are realised in Bank Indonesia's vision and mission, and translated into the Bank Indonesia Strategic Business Plan (SBP), which is divided into 12 strategic programs (SP), and (ii) short-term policies and strategies, as stipulated in the annual plan as an elaboration of the annual budget and work program for each strategic program as contained in the SBP.
   2. Policy and strategy implementation is also strengthened by clear policy frameworks, namely the Bank Indonesia Main Policy Mix Framework (BKU) and the Institutional Policy Mix Framework (BKK), supported by various frameworks, blueprints and other supporting master plans.
   3. Applying the policy and strategy elements ensures the principles of independence, consistency, coordination, accountability and transparency in terms of policy governance and institutional governance at Bank Indonesia.
      
   
   
3. Decision-Making Process
   1. The decision-making process elements are applied in the implementation of Bank Indonesia's duties and authority, which are supported by a robust decision-making process to ensure the various policies formulated and implemented follow the IKKAT principles.
   2. To ensure the decision-making process follows the IKKAT principles, Bank Indonesia implemented regulatory reform concerning the decision-making process at Bank Indonesia in the digital era, as contained in a Board of Governors Regulation (PDG).
   3. ​​​Based on the regulatory reform, the decision-making process at Bank Indonesia was streamlined into three phases, namely: (i) Initiation and verification, (ii) Recommendations, and (iii) Approval. The stages were designed to ensure the decision-making process at Bank Indonesia is performed independently, consistently and accountably, with adequate checks and balances, which involves committees, among others.
      The streamlined decision-making process is based on business process re-engineering through digital collaboration platforms that facilitate coordination and collaboration, while strengthening the checks and balances mechanism.
   
   
4. Responsibilities and Oversight
   1. Implementation of the responsibilities elements is reflected in clear responsibilities for parties implementing Bank Indonesia's duties and authority, namely the Board of Governors.
      In operational terms, the duties and authority are implemented by Members of the Board of Governors (ADG) based on the delegation of duties and authority determined by the Board of Governors. This is supported by cascading the delegation of duties and authority to Work Units, which refers to the division of work unit functions as reflected in the organisational management and business processes of Bank Indonesia.
   2. Meanwhile, the oversight elements are implemented by strengthening the oversight of Bank Indonesia, consisting of: (i) Internal oversight by the Board of Governors with respect to BI performance and the implementation of duties and authority under the charge of each respective Member of the Board of Governors and Work Unit, and (ii) External oversight that includes the supervision function by the People’s Representative Council (DPR) and the audit function by the Audit Board of the Republic of Indonesia. Regarding specific oversight elements, DPR is assisted by the Bank Indonesia Supervisory Board (BSBI).
   3. Strengthening implementation of the responsibilities and oversight elements, Bank Indonesia has drafted various regulations, including regulations concerning the delegation of duties and authority of the Members of the Board of Governors (ADG), regulations concerning work unit functions and organisational management at Bank Indonesia, as well as regulations concerning the implementation and organisation of BSBI duties as mandated by the P2SK Act.
   4. The responsibilities and oversight elements are applied to ensure independence, consistency, coordination, accountability and transparency in the implementation of Bank Indonesia's duties and authority, supported by the effective and efficient use of resources.
   
   
5. Ethics, Risk Management, Internal Audit and Legal Function
   1. The Code of Ethics element is implemented to ensure the application of IKKAT principles by individuals at Bank Indonesia, which is deployed through the Bank Indonesia Code of Ethics by the Board of Governors in accordance with the Board of Governors Regulation (PDG) concerning the Bank Indonesia Code of Ethics and Code of Conduct. This includes provisions concerning the obligations of all Members of the Board of Governors and employees of Bank Indonesia, as well as enforcement by the Board of Governors, Members of the Board of Governors and Work Unit Leaders in accordance with their respective jurisdiction.
      The implementation and enforcement of the Code of Ethics at Bank Indonesia is further strengthened by supporting infrastructure, namely: (i) The whistleblowing system, (ii) Public complaint channels, (iii) Anti-gratification and anti-bribery systems, (iv) Integrity pacts, and (v) Wealth reporting by state officials.
   2. Meanwhile, the risk management, internal audit and legal function elements are applied to ensure Bank Indonesia's duties and authority are implemented in line with IKKAT principles and supported by the measured use of resources. Risk management, the internal audit and legal function are coordinated and integrated with strategic planning and performance control, supported by a clear framework for each function.
   
   
   
6. Stakeholder Relations
   1. Implementation of the stakeholder relations element is reflected in the implementation of Bank Indonesia's duties and authority, which constantly strives for consistency and considers the implications for the stakeholders through coordination with external stakeholders (DPR, Government, relevant authorities or institutions and/or other strategic partners nationally and internationally) and internal stakeholders (ADG, Work Units and all employees).
      This aims to support the effectiveness of policy formulation and implementation as well as institutional management at Bank Indonesia. Relations are also maintained with stakeholders in the context of transparency concerning the implementation of Bank Indonesia's duties and functions, while maintaining Bank Indonesia’s independence and accountability.
   2. The implementation of stakeholder relations in policy and institutional governance refers to the BKU and BKK frameworks.
      
   
   
   
7. Reporting and Communication
   1. The reporting and communication element is applied in accordance with prevailing laws and regulations concerning information disclosure, data protection, information confidentiality as well as other relevant laws and regulations. The reporting and communication element is an integral part of Bank Indonesia's accountability, transparency and coordination principles to strengthen independence.
   2. Reporting aims to fulfil Bank Indonesia's accountability mandate as stated in Article 58 of the P2SK Act, consisting of quarterly and annual reports submitted in writing to the President and People’s Representative Council (DPR), including but not limited to institutional performance and the annual financial statements.
   3. Meanwhile, Bank Indonesia communication is a public delivery channel that encompasses both policy governance and institutional governance.
      • Communication in policy governance aims to support policy effectiveness and encompasses: (i) Public communication each fiscal year by delivering information concerning evaluations of policy implementation at Bank Indonesia in the previous year, as well as the policy direction and targets for the upcoming year, (ii) Communicating the policy goals and framework, policy decisions and supporting assessments, as well as policy implementation, outcomes and evaluations, as reflected in the communication of decisions taken at the Monthly Board of Governors Meeting (RDG), and (iii) Communicating data and information and/or the results of studies performed by Bank Indonesia.
      • Communication in institutional governance aims to support institutional management effectiveness and accountability, which includes but is not limited to: (i) Communicating the financial conditions of Bank Indonesia to the public at large, and (ii) Communicating the institutional performance of Bank Indonesia to the People’s Representative Council (DPR).
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