THE FINANCIAL SE​RVICES SECTOR REMAINED STABLE IN ANTICIPATING HIGHER FOR LONGER GLOBAL INTEREST RATES​

Jakarta, 9th October 2023. The Indonesian Financial Services Authority (OJK) Board of Commissioners' monthly meeting on 27 September 2023 assessed that the stability of the national financial services sector was maintained, supported by solid capital, ample liquidity and sound risk profile, thus increasing optimism that the financial services sector can effectively mitigate the risk of higher for longer global interest rates.

Global economic divergence continued. In the US, persistently high inflation against a backdrop of solid economic performance was predicted to induce a more hawkish policy of the Federal Reserve. In Europe, inflation remained high despite continuing economic moderation, with monetary authorities hiking policy rates in response, yet there were indications that interest rates had peaked.

In China, meanwhile, the economic recovery remained slower than expected, as the economic performance was at the pandemic level, thus raising concerns for the global economic recovery.  Furthermore, the fiscal and monetary incentive measures taken by the authorities remained limited.

Such developments had perpetuated the upward trend of bond yields in the US and USD appreciation, thus triggering capital outflow pressures from emerging markets, including Indonesia. In addition, volatility in the financial markets, including the stock market, bond market, and forex market, was also trending upwards.

Domestically, inflation accelerated to 3.27% (yoy), in line with market expectations of 3.3%, driven upwards by most commodity groups, particularly food, beverages, and tobacco. On the other hand, core inflation continued slowing down, reaching 2.18% (yoy), as reflected in low retail sales. Notwithstanding, corporate sector performance remained relatively sound, as indicated by a Manufacturing PMI that remained in the expansionary zone, coupled with an ongoing trade surplus.

Developments in the Capital Market

As of 29th September 2023, the Indonesian stock market moderated slightly by 0.19% (mtd) to a level of 6,939.89 (August 2023: 6,953.26), with non-residents posting an outflow of IDR4.06 trillion mtd, mainly due to crossing transactions (August 2023: IDR20.10 trillion outflow mtd). Several sectors in the Jakarta Composite Index (JCI) rallied in September 2023, among others, the raw materials sector and the energy sector.

On a year-to-date basis, the JCI rallied 1.30%, with non-residents posting a net sell totalling IDR5.24 trillion (August 2023: net sell of IDR1.18 trillion ytd). In terms of transaction liquidity, the average value of stock market transactions recorded in September 2023 increased to IDR11.36 trillion mtd and IDR10.49 trillion ytd (August 2023: IDR11.20 trillion mtd and IDR10.38 trillion ytd).

Consistent with global movements, the SBN market booked an outflow by non-resident investors totalling IDR23.30 trillion mtd (August 2023: outflow of IDR8.89 trillion mtd), thereby triggering a 26.54bps mtd average increase across all tenors. Year-to-date, SBN yield decreased by an average of 15.38bps across all tenors, with non-residents booking a net buy totalling IDR60.81 trillion ytd.

 In the bond market, the Indonesian Composite Bond Index (ICBI) moderated by 1.18% mtd despite gaining 5.91% ytd to a level of 365.17 (August 2023: strengthened 0.09% mtd or 7.17% ytd). In the corporate bond market, non-resident investor outflows stood at IDR349.15 billion mtd or IDR911.13 billion ytd.

In the mutual fund industry, Assets Under Management (AUM) recorded at IDR838.18 trillion (up 1.29% ytd), with the Net Asset Value (NAV) of mutual funds recorded at IDR507.98 trillion on 27 September 2023, down 1.02% mtd.  In addition, mutual funds recorded a net subscription totalling IDR0.96 trillion mtd.  On a year-to-date basis, the NAV increased 0.62%, with a net subscription of IDR9.54 trillion.

Strong interest in capital market fundraising continued, reaching IDR190.02 trillion, with 67 new issuers in the reporting period. As many as 89 public offerings were in the pipeline, with an estimated value of IDR41.21 trillion, including 58 IPOs by new issuers.

In securities crowdfunding (SCF), as an alternative funding source of SMEs, as of 29 September 2023, 16 providers had been licensed by OJK, with 456 issuers, 161,660 investors, and a total amount of IDR975.13 billion in raised funds.

On 26 September 2023, the President of the Republic of Indonesia, Joko Widodo, officially launched the Indonesia Carbon Exchange (IDXCarbon) at the Indonesia Stock Exchange (IDX) as an organizer. The total value of trade recorded from 26-29 September 2023 on the Indonesia Carbon Exchange reached IDR29.21 billion, with the volume of carbon units traded totalling 459,953 tons of CO2e.

The initial trade involved 16 players, consisting of one seller (PT Pertamina Geothermal Energy Tbk) and 15 companies acting as buyers of carbon units. The carbon units were provided by Pertamina New and Renewable Energy (PNRE), which provides Carbon Units from Unit 5 of Project Lahendong and Unit 6 of PT Pertamina Geothermal Energy Tbk in North Sulawesi. The project was registered as a Greenhouse Gas Emission Reduction Certificate (SPE-GRK) series of Indonesia Technology-Based Solutions (IDTBS).

In regard to the law enforcement in the capital market sector:

1. As of September 2023, OJK imposed administrative sanctions on 102 parties based on investigations against cases in the capital market, comprising administrative sanctions in the form of fines amounting to IDR57.9 billion, 8 revocations of licenses, a license suspension, 45 written orders, and 23 written admonitions, as well as administrative sanctions in the form of fines totalling IDR12 billion on 254 financial service providers in the capital market along with 5 written admonitions for the late submission of reports.
2. In September 2023, OJK imposed administrative sanctions by revoking the business licences of PT Nadira Investasikita Bersama as a securities company conducting business activity as a broker-dealer specifically established to market mutual funds and PT Maseri Aset Manajemen as an investment manager that were proven to violate the laws and regulations of the capital market sector.
3. In September 2023, OJK imposed administrative sanctions in the form of written admonitions and administrative sanctions in the form of fines totalling IDR1.4 billion, as follows:

1. Administrative sanctions in the form of written admonitions against 10 notaries active in the capital market without certificates as a registered capital market supporting profession;
2. Administrative sanctions in the form of fines totalling IDR750 million against 3 parties for violating the laws and regulations of the capital market, namely sanctions relating to the employees of a securities company for conducting marketing activities without an individual license from OJK, sanctions against the board of directors, and sanctions against the securities company itself for supervisory violations and accountability for the actions of the employees; and
3. Administrative sanctions in the form of a fine totalling IDR600 million against a party in a stock trading case.

Developments in the Banking Sector 

The banking sector demonstrated sound resilience with solid capital supported by robust credit risk amid heightened pressure from higher for longer global interest rates. In general, the banking industry maintained solid capital, as reflected by a high Capital Adequacy Ratio (CAR) of 27.66%.

The bank intermediation function remained well-maintained in supporting the economy on the funding (lending) and deposit-taking sides. In August 2023, the growth of loan disbursements by the banking industry accelerated to 9.06% yoy (July 2023: 8.54% yoy), reaching IDR6,739.40 trillion, led by investment loans at 11.25% yoy.  Credit growth was dominated by national private commercial banks, recorded at 12.34% yoy. 

Meanwhile, third-party funds (TPF) in August 2023 posted 6.24% yoy growth (July 2023: 6.62% yoy) to a total of IDR8,082 trillion, driven by demand deposits at 8.02% yoy.  TPF growth moderated as a corollary of increasing private consumption, among others, after the Government officially revoked the pandemic status of Covid-19.

Liquidity in the banking industry remained ample in August 2023, with liquidity ratios maintained. The ratios of Liquid Assets to Non-Core Deposits (AL/NCD) and Liquid Assets to Third-Party Funds (AL/DPK) stood respectively at 118.50% (July 2023: 118.37%) and 26.49% (July 2023: 26.57%), well above the corresponding minimum thresholds of 50% and 10%.

Meanwhile, credit quality was maintained in the banking industry with a net NPL ratio of 0.79% (July 2023: 0.80%) and a gross NPL ratio of 2.50% (July 2023: 2.51%). The economic recovery remained intact in the real sector, thus prompting a IDR12.97 trillion decline in Covid-19 restructured loans to IDR326.15 trillion (July 2023: IDR339.12 trillion), with the number of affected borrowers also falling by 10 thousand to 1.46 million customers (July 2023:1.46 million customers).

The decline in restructured loans lowered the ratio of Loans at Risk (LaR) to 12.55% (July 2023: 12.59%). Targeted Covid-19 restructured loans (specific segments, sectors, industries, and regions that require an additional restructuring period of one year until 31 March 2024) accounted for 44.5% of total Covid-19 restructured loans, or IDR145.25 trillion.

Consistent with lower credit risk, relatively stable provisions for impairment losses were maintained by the banking industry with a value of loan loss provisions recorded at IDR346.7 trillion in August 2023, up 0.8 trillion mtm and the coverage of Covid-19 restructured loan loss provisions estimated to increase to a level of 30.0%.  This reflected anticipation by the banking industry to mitigate potential credit risk when the policy for restructured loans due to the ongoing impact of the Covid-19 pandemic would be unwind in March 2024.

Despite increasing and fluctuating US bond yields, market risk was also relatively well mitigated. The net open position (NOP) was low and stable at 1.72% (July 2023: 1.75%), far below the 20% threshold. The banking industry was anticipating an uptick in SBN yield by, among others, shortening SBN duration and rebalancing the held to maturity (HTM) and available for sale (AFS) portfolios to avoid potential losses from changes in the fair value of securities from impacting bank capital.

The high level of bank capital was expected to absorb the potential risks faced and OJK would continue reviving the intermediation function by maintaining an optimal balance between credit growth and maintaining liquidity.

Moving forward, the ongoing impact of economic uncertainty and global geopolitical tensions demanded vigilance, particularly as global monetary policy tightening (hawkish) and economic moderation in China could increase sentiment towards liquidity risk and market risk.

The banking industry, therefore, was urged to bolster resilience by strengthening capital and setting aside adequate reserves. In addition to periodic stress testing of the banking industry to measure bank resilience, OJK requested that the banking industry perform independent stress tests regularly to ensure the strength of capital and the ability to absorb a potential deterioration in the quality of restructured loans.

Furthermore, OJK strived to strengthen risk mitigation continuously amidst future challenges by improving the quality of supervision, accompanied by strengthening the regulations.

To that end, various OJK efforts towards banking industry consolidation were expected to continue maintaining a solid banking industry and provide a tangible economic and public contribution. The consolidation of the banking industry was also strengthened through efforts to improve financial system integrity through the promulgation of OJK Regulation (POJK) Number 17 of 2023 concerning the Application of Governance for Commercial Banks as a continuation of the mandate in accordance with the Financial Sector Development and Strengthening (P2SK) Act.

In addition to maintaining the integrity of the banking system, OJK will act decisively and cooperate with the Law Enforcement Apparatus (APH) and the Indonesian Financial Transaction Reports and Analysis Centre (INTRAC) to take action against parties exploiting banks for illegal purposes.

Developments in the Insurance, Guarantee and Pension Fund (PPDP) Sector

In the PPDP sector, the accumulated premium income in the insurance industry reached IDR203.42 trillion from January to August 2023, contracting 1.20% compared with the same period of the previous year (August 2022: 2.10%).

The growth of accumulated life insurance premiums improved to experience a shallower 6.58% yoy contraction with a value of IDR118.30 trillion in August 2023, driven by the normalization of premium income in the investment-linked insurance products (PAYDI) business line. On the other hand, the accumulated general insurance and reinsurance premiums recorded positive 7.38% yoy growth (August 2022: 17.77%) to reach IDR85.13 trillion.

In general, capital in the insurance industry was maintained, with the life insurance and general insurance sectors recording risk-based capital (RBC) well above the 120% threshold at 452.31% and 310.63%, respectively (July 2023: 460.32% and 311.53%).

In terms of social insurance, the total assets of BPJS Kesehatan (Indonesia's national social security organizing body for health) reached IDR118.25 trillion in July 2023, growing 14.73% yoy.  In the same period, the total assets of BPJS Ketenagakerjaan (Indonesia's national social security administrator for employment) reached IDR704.67 trillion, growing 12.72% yoy.

Meanwhile, the pension funds industry recorded 6.74% (yoy) asset growth, with asset values totalling IDR361.01 trillion. Among guarantee companies, the nominal rate of return on guarantee services in August 2023 increased to IDR5.16 trillion (July 2023: IDR4.65 trillion), with asset value reaching IDR44.66 trillion (July 2023: IDR44.64 trillion).

In regard to regulatory enforcement in the PPDP sector, OJK was fully supportive of the legal process against allegations of corruption/fraud in several state-owned pension funds. In general, OJK supervision revealed that of 138 Employer Pension Funds – Defined Benefit Plans (EPF-DBPP), there were pension funds that had yet to reach Funding Level I, namely those lacking the coverage to meet obligations in the short term (solvency liabilities) or long term (actuarial liabilities). The issues contributing to EPF-DBPP failure to meet Funding Level I were as follows:

1. The inability of employers to pay contributions to the pension fund, leading to large contribution receivables;
2. The performance of pension fund investments below the actuarial rate;
3. Unprofessional management leading to suboptimal returns on investment. 

Addressing those issues, OJK established a special working unit to provide tighter surveillance along with remedial efforts through the following supervisory measures:

1. Requesting employers to submit plans to improve funding and repay the outstanding contribution debt;
2. Coordinating with the Ministry of State-Owned Enterprises (as shareholder), which had formed a special team to improve the management and funding level (due diligence) of state-owned pension funds. To date, OJK has not received information regarding the final outcome of the due diligence regarding the management of state-owned pension funds;
3. Imposing administrative sanctions on employers failing to make contribution payments on time and in the correct amount;
4. Requesting employers to reduce the actuarial rate gradually, that was too high; and
5. Requesting pension fund management to evaluate the investment portfolios and improve investment performance.

In regard to law enforcement measures in the insurance industry by, among others, arresting suspected unlicensed insurance brokers by police investigators in conjunction with OJK investigators and handing the suspects over to the South Jakarta Prosecutor's Office for further processing. Such law enforcement measures were related to the alleged insurance crimes perpetrated by CV Duta Asuransi Indonesia (CV DAI), which carried out unlicensed insurance brokerage business activities (in accordance with Article 73, Paragraph (2) of Act Number 40 of 2014 concerning Insurance).

Developments in the Financing Companies, Venture Capital Companies, Microfinance Institutions and Other Financial Services Institutions (PVML) Sector

In the PVML sector, the growth of financing receivables remained high at 16.33% yoy in August 2023 (July 2023: 16.22%) to reach IDR453.16 trillion, supported by working capital financing and investment financing that grew 25.12% yoy and 15.23% yoy, respectively.

The risk profile of finance companies was maintained, with net non-performing financing (NPF) recorded at 0.76% (July 2023: 0.75%) and gross NPF at 2.66% (July 2023: 2.69%). The gearing ratio of finance companies stood at 2.22 times (July 2023: 2.24 times), well below the 10-time threshold.

The growth of venture capital financing contracted 0.95% yoy in August 2023 (July 2023: 0.99% yoy), with the value of financing recorded at IDR17.79 trillion (July 2023: IDR18.12 trillion).

Meanwhile, in FinTech peer-to-peer (P2P) lending posted a higher 12.46% (yoy) growth of outstanding financing in August 2023 (July 2023: 22.41%) and a nominal value of IDR53.12 trillion. Meanwhile, the aggregate credit risk (TWP90) increased slightly to 2.88% (July 2023: 3.47%).

In terms of regulatory enforcement in the PVML sector:

1.Regarding the fulfilment of minimum equity requirements by Financing Companies, set at IDR100 billion in accordance with OJK Regulation (POJK) Number 35/POJK.05/2018, as many as eight finance companies failed to meet the requirements. Consequently, OJK took supervisory actions and enforcement against the finance companies failing to meet the minimum equity requirements based on an approved timeline.

2. In fulfilling the gradual implementation of the minimum equity requirements for FinTech peer-to-peer (P2P) lending of IDR12.5 billion, namely IDR2.5 billion in July 2023, IDR7.5 billion in July 2024, and IDR12.5 billion in July 2025, there were 33 FinTech P2P lenders that failed to meet the requirements as of August 2023.

The increase in the number of P2P lenders failing to meet the equity requirements of IDR2.5 billion in August 2023 compared with conditions one month earlier was due to a decline in lender performance, thus incurring losses.

In total, 11 of 33 P2P lenders had not submitted applications for additional capital, while 22 P2P lenders were in the approval process to increase paid-up capital and 2 lenders were in the process of returning their business license. OJK issued administrative sanctions in the form of written admonitions to lenders failing to meet the regulations to increase capital immediately and maintain a minimum equity of IDR2.5 billion.

3. Regarding loan collection allegations by one FinTech P2P lending platform, namely PT Pembiayaan Digital Indonesia (AdaKami), failed to comply with prevailing regulations, OJK had summoned the lender in question and took the following measures:

1. OJK instructed AdaKami to initiate an in-depth investigation immediately and identify information relating to the suicide victims while providing a hotline to receive complaints from the public regarding the identity of the victims.
2. OJK instructed the FinTech Lenders Association (AFPI) to review the conformity of interest and administration fees charged by AdaKami in accordance with the AFPI Code of Conduct.
3. OJK requested that AdaKami report all investigation findings and follow-up actions taken by AdaKami to resolve this case.
4. OJK would take firm action if the findings of the investigation revealed any violations perpetrated by AdaKami.
5. OJK imposed sanctions in the form of an admonition letter to AdaKami for the violations perpetrated regarding unethical loan collection

4. In September 2023, OJK imposed administrative sanctions on 36 Financing Companies, 20 Venture Capital Companies and 14 FinTech P2P lending platforms for violations against prevailing OJK regulations or as follow-up actions to on-site inspections. For Financing Companies and Venture Capital Companies, the administrative sanctions were a business activity restriction, 23 fines, 43 written admonitions/warnings and 6 advisory notes. In terms of FinTech P2P lending, the administrative sanctions were in the form of 22 written admonitions as well as a written admonition and fine.

Developments in the Financial Sector Technological Innovations (ITSK), Digital Financial Assets and Crypto Assets (IAKD) Sector

1. Regarding the recording process within the framework of the Regulatory Sandbox:

1. Since the promulgation of POJK Number 13 of 2018 concerning Digital Financial Innovation in the Financial Services Sector, OJK received 457 applications from ITSK service providers to be registered in the Regulatory Sandbox, of which 150 were registered. 
2. The recording process in the regulatory sandbox had entered the 26th batch, where OJK had received applications from 14 prospective providers of financial sector technological innovation (ITSK). OJK held an audience with the 14 prospective ITSK providers that had submitted applications to check the completeness of documentation and verify the data and information before participating in the regulatory sandbox process.
3. On the other hand, OJK revoked the registered status of PT Acura Labs Indonesia as an ITSK provider in the innovative credit scoring cluster.

2. There were 105 providers, of financial sector technological innovation (ITSK) registered in the OJK Regulatory Sandbox as of September 2023 across 15 business model clusters, as follows:

3. Seeking to accelerate the Regulatory Sandbox process for the 105 ITSK providers, OJK carried out mapping to determine suitable action plans:

a. For the 36 ITSK providers that have not exceeded the Regulatory Sandbox process period.

b. For the 69 ITSK providers that have exceeded the Regulatory Sandbox process period, the following action plan recommendation:

• 55 ITSK providers will be assessed in order to provide recommendations.
• 3 ITSK providers will return their registration certificates.
• 2 ITSK providers will provide clarification.
• 8 ITSK providers will receive a second admonition letter.
• 1 ITSK provider will submit a 3-month action plan.

In addition, OJK has prepared assessment parameters and standards prioritizing ITSK providers that have exceeded the 1.5-year trial period while taking into consideration risk mitigation, consumer protection, and innovation sustainability in the financial services sector.

In terms of enforcement measures in the IAKD sector to ensure compliance among ITSK providers with prevailing regulations, OJK carried out monitoring in the form of on-site supervision for 10 dormant ITSK providers that have already received admonition letters. As a follow-up action to the on-site supervision, OJK issued a second admonition letter to 8 providers. Regarding the two other providers, OJK has requested that one provider submit the results of action plan implementation and is processing the revocation of the status of the other provider that relinquished its registration letter.

Developments in Consumer Protection and Education

OJK continues to strive to expand the reach of financial education and literacy programs by providing online and offline activities, which are expected to impact communities throughout Indonesia. As of 30 September 2023, OJK had rolled out 2,058 financial education activities, participated by 459,111 individuals nationwide. Through its financial education communication channels, namely Sikapi Uangmu, OJK published 323 financial education contents, which were accessed by 1,505,182 viewers. In addition, as of 30 September 2023, the number of users of OJK's Learning Management System (LMSKU) reached 33,401 who accessed the modules 45,894 times, and 37,320 certificates of module completion were issued.

Financial literacy and inclusion efforts by OJK also involved the strategic support of various parties, including government ministries/agencies, financial services providers, academics, and other stakeholders, such as the Regional Financial Access Acceleration Teams (TPAKDs). As of 30 September 2023, a total of 504 TPAKD teams had been established in 34 provinces of Indonesia, with 461 in districts /municipalities (91.44% of all districts/municipalities in Indonesia).

In October 2023, marking Financial Inclusion Month (BIK), which has been held annually since 2016, OJK will host more than 130 programs to strengthen financial literacy and inclusion throughout Indonesia. Financial Inclusion Month is a massive, integrated, and sustainable activity organized through collaboration among OJK, relevant government ministries/agencies, self-regulatory organizations (SRO), associations, financial services institutions, and e-commerce to enhance public understanding of financial products and/or services while simultaneously accelerating the uptake of financial products and services. Financial Inclusion Month is expected to bolster the support of all stakeholders, thereby achieving the financial inclusion target of 90% in 2024.

The theme of Financial Inclusion Month in 2023 is “Equitable Financial Access, Prosperous Society" and features the following activities:

• Sales of incentivized financial products and services;
• Account opening acquisition, policies, and other financial products;
• Loan/financing facilitation services for the public as well as micro and small enterprises through business matching activities, among others;
• Financial literacy activities (socialization activities, webinars, financial education, bank goes to school/campus, consultation clinics, and outreach programs);
• Exhibition of financial products and/or services; and
• A massive consumer protection, financial inclusion, and literacy campaign along with various publications.

From a consumer protection perspective, OJK remained firmly committed to increasing its presence among consumers, as demonstrated by the implementation of several strategic activities as follows:

• The presence and support of OJK assistance for thousands of university students at the Raden Mas Said Surakarta State Islamic University regarding the case of Buy Now Pay Later (BNPL) product offerings that were not relevant to the students' needs. 
• A kick-off meeting for the preparation of supreme court regulations concerning OJK civil lawsuits as a form of synergy between the Supreme Court and OJK was held on 12th September 2023 in response to OJK's authority to file civil lawsuits and ensure the presence of the state in protecting the rights of consumers and the public.
• Education for women in accordance with the mandate of the National Financial Inclusion Strategy for Women (SNKI-P) and Indonesian National Financial Literacy Strategy (SNLKI) 2021-2025, including education targeting the Darma Wanita group in the Ministry of Marine Affairs and Fisheries as well as the housewife and MSME segments in various other regions

From January to 30 September 2023, OJK received 227,328 inquiries, including 16,555 complaints, 57 complaints indicative of violations, and 1,700 disputes that were lodged with Alternative Dispute Resolution Institutions (LAPS) in the financial services sector.

Of these complaints, 7,719 were related to the banking sector, 3,475 were related to the FinTech industry, 2,793 were related to financing companies, 1,147 were related to the insurance industry, and the remainder were related to the capital market sector and other NBFIs. 

Regarding complaints that were lodged through the Consumer Protection Portal Application (APPK), OJK continued to encourage the resolution of such complaints, including those indicating disputes and those indicating violations. In regard to this, 14,410 complaints (87.04%) were resolved through the Internal Dispute Resolution of the corresponding Financial Service Providers, and 2,145 complaints (12.96%) are currently being resolved.

In terms of eradicating illegal financial activities, OJK in synergy with all members of the Task Force for Eradication of Illegal Financial Activities (formerly the Investment Alert Task Force or SWI) from 12 government ministries/agencies, enhanced their coordination to handle illegal online investments and loans.

From 1 January to 6 October 2023, the Task Force closed 1,484 illegal financial entities, comprising 18 illegal investment entities and 1,466 illegal online lending entities. In addition, 8,047 complaints were received, consisting of 7,710 complaints regarding illegal online loans and 337 complaints concerning illegal investments, dominated by complaints in West Java (1,887 complaints) and Jakarta (1,286 complaints).

Policy Direction

OJK has taken the following policy measures to maintain the stability of the financial services sector and optimize its role in the national economy:

A. Policies to Maintain Financial System Stability

OJK will continue monitoring the impact of the recent significant increase in yields affecting the debt securities market on domestic financial markets. Seeking to maintain the resilience and stability of the financial services sector amid financial market fluctuations, financial services institutions are expected to monitor developments in their investment portfolios closely. 

B. Policies to Strengthen the Financial Services Sector and Market Infrastructure

1. OJK promulgated OJK Regulation (POJK) Number 17 of 2023 concerning the Application of Governance for Commercial Banks as a follow-up action to the mandate of the Financial Sector Development and Strengthening (P2SK) Act in terms of strengthening the application of governance principles at banks, supported by integrated risk management and compliance. The OJK regulation was issued considering that governance is fundamental to the sound and sustainable management of business activity at a bank
2. OJK instructed banks to block several accounts used in illegal activities, not only accounts used for online gambling but also bank accounts used for other economic crimes, including illegal investments and online lending.  OJK will continue strengthening cooperation with law enforcement apparatus and the Indonesian Financial Transaction Reports and Analysis Centre (INTRAC) to deal with various crimes that attempt to exploit the banking system.
3. OJK was realizing its commitment to accelerate economic decarbonization through the launch and implementation of trading Carbon Units through the Carbon Exchange on 26th September 2023 in synergy with the Indonesia Stock Exchange (IDX) as the operator of the Carbon Exchange. IDX had successfully passed the OJK licensing process as operator of the Carbon Exchange in accordance with Circular Letter (SEOJK) Number 12/SEOJK.04/2023 concerning the Procedures for Trading Carbon through the Carbon Exchange as the implementation regulations for the OJK regulation concerning Carbon Trading through the Carbon Exchange.
4. In pursuing sustainable development to maintain economic stability, OJK supports innovation in sustainable financial products and services, including the preparation of a draft OJK regulation concerning the Issuance and Requirements for Sustainability-Based Debt Securities and Sukuk, planned for promulgation this year. The draft OJK regulation will not only regulate issuances of Green Bonds, as legislated previously, but also expand provisions concerning issuances of Green Sukuk, Social Bonds/Sukuk, Sustainability Bonds/Sukuk, Sustainability-Linked Bonds/Sukuk and Waqf Sukuk. Expanding the scope of sustainability-based products is an OJK initiative to provide financing facilities that support sustainable development.
5. OJK is committed to continuing improving the quality of human resources in the financial services sector, particularly the capital market industry, in conjunction with representatives of industry/professional associations, professional certification institutions, training institutions and academia to draft National Competency Standards (SKKNI) for the Capital Market Sector. Refinements to the National Competency Standards will include harmonising the substance of competency units, developing competency units relating to business functions and risk management functions, as well as additional competency units relating to sustainable financing carbon trading.
6. OJK is currently preparing a draft OJK regulation (RPOJK) concerning insurance products linked to loans or Islamic finance as well as products in the suretyship or sharia suretyship business lines. During the development, such insurance products have gained the largest portfolio among general insurance companies. The underwriting process carried out by insurance companies is a critical aspect in terms of maintaining the claims ratio and soundness level of insurance companies. The high level of risk exposure borne by insurance products linked to loans necessitates prudent management.
7. OJK is currently conducting a study to formulate a regulatory framework concerning the classification of insurance companies based on level of capital to nurture consolidation in the insurance industry. Therefore, the regulatory framework can subsequently be implemented more proportionally and objectively in harmony with the level of complexity of business activities that can be carried out by insurance companies based on their capital capacity.

C. Islamic Financial Services Sector Development and Strengthening 

1. In the Islamic insurance industry, since the promulgation of the OJK regulation on Islamic business unit spin-offs, OJK is conducting close monitoring to ensure that at the spin-off deadline in 2026, the process can proceed in accordance with prevailing regulations in the form of conversions into Islamic insurance companies (full-fledged) or portfolio transfers to an Islamic insurance company that had been established previously.
2. OJK is committed to increasing Islamic financial inclusion and literacy through:

1. The Islamic financial literacy program that promotes women as ambassadors for Islamic financial literacy (SICANTIKS). One of the program initiatives provides ongoing literacy training to Key Opinion Leaders (KOL) and communities, with a focus on women spreading the teachings of Islam, leaders and managers of the Majelis Taklim education institution, as well as caretakers of mosques, who, through their leadership and influence, can have a massive impact on increasing Islamic financial literacy among women's communities under the auspices of Islamic study groups/Majelis Taklim, and other organizations.
2. The business matching and education forum (FEBIS) for Islamic students, MSMEs, university students, and the Islamic financial services industry through workshops and sharing sessions that present financial inclusion drivers from the Young Entrepreneurs Academy and the National Islamic Economy and Finance Committee (KNEKS). This activity is expected to empower students to become Islamic business players or santripreneurs.

D. Financial Sector Technological Innovations (ITSK), Digital Financial Assets and Crypto Assets (IAKD)

1. In regard to strengthening and developing Financial Sector Technological Innovation (ITSK) and Digital Financial Assets (IAKD) as a quick win in the implementation of the Financial Sector Development and Strengthening (P2SK) Act:

1. OJK is currently preparing the IAKD Masterplan and Roadmap, including crypto assets.
2. Draft POJK and implementation regulations for ITSK to develop innovation in the financial sector and provide legal assurance for providers of ITSK are also being prepared, covering provisions regarding the developmental functions, licensing, supervision, and imposition of sanctions with the support of technical guidance from international institutions and authorities in other countries. 
3. OJK is currently developing a Digital Innovation Center as an innovation hub and strengthening the Regulatory Sandbox function to foster new technology-based innovations, products, services, and activities in the financial services sector.

2. In addition, OJK maintains regular coordination with other relevant authorities to implement regulation and supervision:

1. OJK coordinates with the Commodity Futures Trading Regulatory Agency (BAPPEBTI) regarding the transfer of tasks for regulating and supervising digital financial assets, including crypto assets, in accordance with the P2SK Act. The current process is deepening the mechanisms for the ongoing regulation, licensing, and monitoring of crypto assets.
2. OJK coordinates with Bank Indonesia to discuss the regulation and supervision of ITSK implementation in accordance with the purview of their respective authorities and P2SK Act. The cross-cutting issues are being mapped in terms of policy harmonization and coordination as well as the regulation of crypto assets

E . Strengthening Financial Literacy and Inclusion as well as Consumer Protection

OJK is constantly accelerating financial literacy and inclusion in various regions by facilitating program synergy with various stakeholders, particularly through the TPAKD forum, including the regions of South Sulawesi and West Sulawesi (Sulselbar) as well as Central Java. 

1. In synergy with TPAKD and the Communication Forum for the Financial Services Industry (FKIJK) in Sulselbar, OJK initiated the regional financial literacy and inclusion services program (LAYARKU), which aims to maximize the role of the financial services industry with office networks throughout all districts/municipalities in Sulselbar to increase financial literacy and access to finance among all social strata down to the grassroots level.
2. In synergy with TPAKD and FKIJK in Central Java, OJK initiated the Integrated Financial Information Center (PKID) in villages throughout Central Java as a center of financial information with massive outreach to the smallest lines and village units, thereby increasing literacy and inclusion, strengthening the financial services sector, and educating people against illegal acts that are detrimental to the community. 

F. Strengthening OJK Governance

1.OJK continues to strengthen the effectiveness of supervision by implementing quality standards through quality assurance and quality control functions in all sectors.

2. OJK constantly strengthened the governance and integrity of the financial services sector by facilitating:

1. Forums to strengthen the governance and integrity of the financial services sector, attended by more than 3,000 academics and members of local government, the financial services industry, and other stakeholders in the provinces of Riau Islands, Southeast Sulawesi, and Yogyakarta. 
2. Forums to strengthen financial reporting in the financial services sector in collaboration with the Ministry of State-Owned Enterprises, attended by representatives of the directors, commissioners, audit committees, and internal audit functions of the state-owned enterprises.  The forum discussed internal control over financial reporting (ICOFR) and strengthening the role of public accountants (AP) and public accountant offices (KAP).

3. OJK continues to enhance internal audit and investigative audit capacity through policy refinements, guidelines, and the application of data analytics in collaboration with relevant government ministries and agencies, such as the Corruption Eradication Commission (KPK), the Indonesian Financial Transaction Reports and Analysis Centre (INTRAC), and the Ministry of Finance.

4. Addressing the previous disruptions to OJK's information systems services, OJK implemented remedial measures to ensure a quick and incremental recovery process that restores access to OJK information system services. Calibrated corrective measures remain an ongoing concern towards full recovery so that OJK can continue providing optimal services to the public and the financial services industry.  Moving forward, OJK will continue strengthening its efforts to anticipate information system disruptions by maintaining cooperation with relevant stakeholders. 

G. Policies for Handling Financial Services Institutions Under Special Mention 

In the implementation of the criminal investigation function, as of 29 September 2023, OJK Investigators had completed 110 cases, consisting of 85 cases in the banking sector, 5 cases in the capital market and 20 cases in the NBFI sector.  The number of cases that were brought to the court was 89, i.e., 82 cases decided with a final and binding decision (in kracht), and 7 cases on cassation with the Supreme Court.

Investigation Developments from 2014-2023 

Going forward, OJK continues to strengthen coordination with the Government, Bank Indonesia and Indonesia Deposit Insurance Corporation (IDIC), while cooperating with the financial industry and business associations in the real sector to maintain the stability of the financial services sector and optimize its contribution to the national economy.