The Financial Services Authority (OJK) recently announced that it planned to issue a guideline on internal recovery planning for 12 systemic banks as part of its efforts to shield the economy from a major bank failure. A recovery plan sets out actions that a bank will take to restore its viability in the case of significant deterioration of its financial condition. The OJK rule on this subject — expected to be issued in April — is a supporting regulation mandated by the 2016 Financial System Crisis Prevention and Mitigation (PPKSK) Law. The law effectively gives clarity and space to authorities handling a banking crisis or the threat of one. Nonetheless, despite the improved legal protection and clearer protocols, the PPKSK committee is unlikely to have a comfortable time when a situation calls for its resolution authority to be exercised. To reduce the likelihood of...

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.