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Financial Services Authority (OJK) Chairman Muliaman D Hadad spoke about several matters at the Financial Executive Gathering 2017 held at the Fairmont Hotel, Jakarta, on Friday (Jan. 13). Besides urging the financial services industry (IJK) to contribute to promoting economic growth, he also revealed that the OJK would issue four policies aimed at sustaining domestic financial system's resilience and stability.

"The financial system's resilience and stability are vital to gain more trust in Indonesia's economic prospects and fundamentals," Muliaman said.

The four policies are described below:

1. The OJK will issue provisions on financial conglomerates' liquidity risk management, capital management, and intra-group transaction exposures, to supplement existing rules on financial conglomerates' capital adequacy requirements, risk management and good governance. A revamp of the framework on regulation and supervision of financial conglomerates is important, as the financial services sector's resilience and strength are deeply influenced by the state of financial conglomerates, which control three-quarter of Indonesia's financial market share. 
2. Provision of sufficient liquidity for development financing and monitoring by means of the following efforts, such as optimizing the use of global master repo agreement (GMRA) by financial services companies, initiating the establishment of a securities financing institution—that aims to boost liquidity and efficiency in settlements of securities transactions—and continuous promotion of corporate bonds issuance and their purchase by insurance companies and pension funds. The
   OJK will also ensure that application of liquidity coverage ratio (LCR) requirement runs well and effectively this year, in the interests of more accurate monitoring over banks' liquidity and more appropriate supervisory actions.  Moreover, it will issue a provision on net stable funding ratio (NSFR), which will be applied on foreign banks  and local banks under categories of BUKU 3—banks with minimum core capital between IDR 5 trillion and less than IDR 30 trillion—and BUKU 4—banks with minimum core capital of IDR 30 trillion.
3. To comply with the mandate of Law on Prevention and Management of Financial System Crisis (PPKSK), the OJK will issue several related regulations, especially those concerning recovery plans for systemic banks. They will give further explanation about the bail-in concept that is in line with practices in Indonesia, and the concept's implications on the formulation of other banking resolution mechanisms, including the banking restructuring program (PRP). To supplement these regulations, another one concerning improvement over follow-up banking supervision (exit policy) and establishment of bridge banks will be adopted.
4. Preparing regulations that will drive the non-bank financial industry towards sound and sustainable growth. Thus, as part of the Insurance Law enforcement, this year the OJK will conclude drafting derivative regulations of the Law, which concern joint venture insurance companies, guarantee for policyholders and foreign ownership.

According to Muliaman, the four policies aimed to reinforce integrated supervision, regulate risk management, and build the capacity of national financial services industry. He added that higher contribution from a resilient and stable financial sector would be the key to this year's and future efforts related to economic development and public welfare.