Regulation and Monitoring



The primary focus of banking regulation and supervision is to ensure the optimum functioning of Indonesia’s banking system as:

  1. An institution of public trust in respect of funding and disbursement of funds;
  2. An institution for implementation of monetary policy;
  3. An institution contributing to economic growth and equity;

With the aim of creating a sound banking system (both overall and in terms of individual banks) capable of safeguarding the public interest, achieving sound growth, and contributing in a useful capacity to the national economy.

To achieve these objectives, the approaches used are as follows:

  1. Deregulation
  2. Prudential banking; and
  3. Self-regulatory banking, in which banks consistently implement their own internal regulations for operational activities within the overall guidelines of prudential principles.

:: Scope of Bank Regulation and Supervision

  1. Right to license, comprising the right to establish procedures for the licensing and establishment of a bank. The scope of licensing by Bank Indonesia includes issuance and revocation of operating licenses for banks; issuance of licenses for establishment, closure, and change of address of bank offices; approval of bank owners and management; and issuance of licenses for banks to conduct certain business operations.
  2. Right to regulate, comprising the right to establish regulations governing banking operations and activities for the purpose of fostering a sound banking system capable of delivering banking services as desired by the public.
  3. Right to control, comprising the right to supervise banks. Bank supervision takes place through on-site supervision and off-site supervision. On-site supervision may take the form of general examination and special examination aimed at obtaining a picture of the financial condition of the bank, monitoring the level of bank compliance with prevailing regulations, and ascertaining whether the bank is involved in any unsound practices that may jeopardize the sustainability of bank operations. Off-site supervision is supervision through periodical reports delivered by banks, examination reports, and other information. If it becomes necessary during the implementation of supervision, Bank Indonesia may conduct examination of other parties, including parent company, subsidiaries, connected parties, affiliated parties, and bank debtors. Bank Indonesia may assign another party to conduct examination on behalf of and in the name of Bank Indonesia.
  4. Right to impose sanctions in accordance with laws and regulations in the event that a bank is not fully compliant or is in non-compliance with regulations. Such actions contain elements of guidance to encourage banks to operate in compliance with sound banking principles.


To perform its bank supervision tasks, BI has introduced a system for supervision applying the twin approaches of compliance-based supervision and risk-based supervision (RBS). The use of the RBS approach does not mean doing away with compliance-based supervision, but represents an effort to improve the supervisory system and thus strengthen the effectiveness and efficiency of bank supervision. Over time, the supervisory approach applied by BI will be progressively changed over to fully risk-based supervision.

  1. Compliance based supervision, the compliance-based supervision approach essentially stresses the monitoring of bank compliance for enforcement of the regulatory provisions relevant to bank operations and management. This approach refers to the past condition of the bank with the objective of obtaining assurance that the bank is operated and managed properly in compliance with prudential banking principles.
  2. Risk based supervision, the risk-based supervision approach represents a forward-looking approach to supervision. In using this approach, supervision/examination of a bank is focused on inherent risks in major business lines and the risk control system. This approach allows greater room for proactive actions by the supervisory authority to prevent problems from arising within the bank. The risk-based supervision approach applies a supervision cycle as follows:

Kind of Bank Risks :

  • Credit Risk : Risk arising from default by a counterparty in meeting its obligations..
  • Market Risk : Risk arising from adverse movement in the market variables of the portfolio held by the Bank that may incur losses for the bank. In this letter, market variables are interest rates and exchange rates.
  • Liquidity Risk : Risk including but not limited to Risk caused by default of the Bank on liabilities at due date.
  • Operational Risk : Risk including but not limited to Risk caused by inadequacy or dysfunction in internal processes, human error, system failure, or existence of external problems affecting the operations of the Bank.
  • Legal Risk : Risk caused by weaknesses in juridical matters. Weaknesses in juridical matters include but are not limited to weaknesses resulting from legal claims, absence of legal framework, or contractual weaknesses such as failure to meet the requirements for legal
  • Reputational Risk : Risk including but not limited to Risks caused by negative publicity pertaining to the business operations of the Bank or negative perceptions of the Bank.
  • Strategic Risk : Risk including but not limited to Risks caused by adoption and implementation of an inappropriate strategy for the Bank, inappropriate decision making in the business affairs of the Bank, or lack of responsiveness of the Bank to external change.
  • Compliance Risk : Risk caused by failure of the Bank to comply with or implement prevailing laws and regulations and other legal provisions. Management of Compliance Risk takes place through consistent application of an internal control .


:: Management Information System - Bank Indonesia Banking Sector (SIM-SPBI)

SIM-SPBI is an integrated information system that supports the functions of BI banking supervision, examination and control. In general the management information system for the banking sector is essentially a means of automating the functions of Bank Supervision and Examination, including the collection, calculation and presentation of data / information, it is also to create an integrated information center so that information is always available to support the roles of supervision, examination, research, control and development of the banking system. With available data on bank performance that is comprehensive, prompt and accurate, Bank Indonesia is confident to have the support needed for decision-making, and that the data can be used by other concerned parties in line with existing procedures.

The goals of application of the SIM-SPBI are:

  • To improve the effectiveness and efficiency of the bank supervision and examination system;
  • To bring about standardization in the implementation of the functions of bank supervision and examination;
  • To optimize the analysis of Bank Supervisors and Examiners of bank performance to improve the quality of bank supervision and examination;
  • To facilitate examination of the audit trail by the competent authorities;
  • To increase the security and integrity of bank data and information.

SIM-SPBI is expected to improve the integrity and competence of bank supervisors and examiners and to upgrade the effectiveness of bank supervision, which is in turn it could create a sound banking system.

  1. Supervision Management Information System (SIMWAS): The SIMWAS information system was developed to improve the effectiveness and efficiency of the Commercial Bank supervision system. By means of the SIMWAS, bank supervisors can optimize the analysis of bank performance, expedite the collection of data regarding bank finances (including Bank Soundness rating), and increase the security and integrity of banking system data and information. The modules of the SIMWAS software application include, among others, the Bank Basic Data and Fit and Proper Test (FPT) modules. The FPT module provides complete information concerning the profiles of prospects and or management and controlling shareholders of a bank.
  2. Bank Investigation Information System (SIBADI): The SIBADI information system was developed to improve administrative discipline and facilitate ease of monitoring of the functions of investigation of criminal acts in the banking system by the Directorate of Banking System Investigation and Mediation (DIMP). The SIBADI system enables the monitoring of the progress of an investigation of a suspected criminal act perpetrated by a bank from the point a report of infringement is received (from a banking system supervision unit or the public), the schedule of the investigation, and the measures initiated until the final results of the investigation in question. The SIBADI information system is intended to automate the administrative activities of an investigation of a criminal act in the banking sector through the collection and presentation of data / information, and to create an integrated and readily available information center to support the functions of investigation of a criminal act in the banking system, as well as measures of mediation between a client and a bank involving cases with a value of up to Rupiah 500 million.
  3. Data Mart : The Data Mart software application provides information related to the institutionalization, ownership and management and operations and supervision strategy adopted by a bank, thus, the system is expected to optimize the information required for supervision and guided development of a bank.

:: Debitor Information System (SID)

SID is an information system designed to provide information regarding debtors, both individuals or businesses. The information is processed based on reporting institution (members) of available funds received by Bank Indonesia from Reporters. SID was developed to assist with the following goals:

  1. Internally by Bank Indonesia for the purpose of:
    • bank supervision, and
    • stability of the financial system in Indonesia.
  2. Externally by Bank Indonesia:
    • With respect to credit providers, among other things:
      • To assist the prompt process of analysis and decision-making regarding a credit disbursement;
      • To reduce the dependency of a credit provider on conventional collateral. Credit providers can assess the credit record of a prospect debtor as a substitute / compliment to collateral.
    • With respect to credit recipients, among other things:
      • To expedite the time required to obtain credit approval;
      • New clients, particularly those classified as Small/Micro Businesses, can have wider access to credit providers, whereby their credibility is judged by their financial record rather than depending solely upon their ability to provide collateral.

:: Rural Bank Supervision Management Information System (SIMWAS BPR)

In an effort to improve the effectiveness of implementation of the functions of supervision, examination and research of rural bank, Bank Indonesia designed the Rural Bank Supervision Management Information System (SIMWAS BPR) which has been implemented in July 2005. The SIMWAS BPR information system was created to improve the effectiveness and efficiency of the BPR supervision system. Using the SIMWAS BPR, BPR supervisors can optimize the analysis of the performance of a BPR, expedite access to information regarding the financial condition of BPR (including BPR Soundness rating), and increase the security and integrity of banking system data and information.

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