OJK's Role in Maintaining National Financial System Stability
Indonesia's financial system transformation is the result of lessons learned from a series of financial crises, particularly the 1997-1998 Asian crisis and the 2008 global crisis. These experiences led to the establishment of OJK as an integrated authority supervising all financial services sectors through Law No. 21 of 2011. OJK's presence marks a significant milestone in strengthening the national financial system architecture to be more resilient and adaptive.
Law No. 9 of 2016 concerning Prevention and Handling of Financial System Crisis (PPKSK), which was later strengthened by Law No. 4 of 2023 concerning Financial Sector Development and Strengthening (PPSK), further solidified OJK's role in the national financial system stability framework. Through these laws, OJK became an integral part of the Financial System Stability Committee (KSSK), alongside the Ministry of Finance, Bank Indonesia, and the Deposit Insurance Corporation.
KSSK, with the Minister of Finance as coordinator, holds a collective mandate to maintain financial system stability. Within this forum, each member brings specific expertise: the Ministry of Finance manages fiscal policy, Bank Indonesia regulates monetary policy and payment systems, OJK supervises the financial services sector, and LPS carries out deposit insurance and bank resolution functions.
OJK conducts integrated supervision across the complete spectrum of financial services sectors - from conventional and Islamic banking to digital financial innovations and crypto assets. This holistic approach enables early detection of systemic risks and more effective policy implementation. OJK's supervisory system rests on two pillars: assessment of individual financial institutions' health and evaluation of systemic impact on overall financial system stability.
In practice, OJK has developed robust coordination protocols with other KSSK members. This synergy is particularly critical in handling banking liquidity and solvency issues, where OJK collaborates closely with Bank Indonesia as the lender of last resort and LPS as the bank resolution authority. These coordination mechanisms are regularly tested through National Financial System Crisis Management Simulations (Simkrisnas).
The effectiveness of OJK's role in maintaining financial system stability has been tested through various challenges, including the COVID-19 pandemic. This experience demonstrates that OJK's integrated supervisory framework, supported by close coordination within KSSK, can maintain national financial system resilience while continuing to promote financial innovation and inclusion for sustainable economic growth.
