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The enactment of Law No. 4 of 2023 on the Development and Strengthening of the Financial Sector (UU P2SK) marks a significant reform in Indonesia’s financial regulatory landscape. This omnibus law introduces comprehensive changes to Bankruptcy (Kepailitan) and Delay of Payment (PKPU) procedures, particularly for financial institutions.
Key Changes Introduced by UU P2SK
- Exclusive Authority of OJK and Bank Indonesia
The OJK (Financial Services Authority) is the sole authority responsible for filing bankruptcy or PKPU petitions for financial institutions under its supervision, including banks, insurance companies, pension funds, and fintech platforms. Bank Indonesia holds similar authority for payment system providers and financial market infrastructure entities. - Bankruptcy of E-Money Issuers
Funds separated by e-money issuers to fulfill obligations to users and merchants are excluded from bankruptcy assets and must be used solely for those obligations. - Confidentiality of Debtor Information
Banks and Islamic banks must maintain the confidentiality of depositor and investor data. Exceptions apply for court-appointed receivers or liquidators, who may request access for purposes of bankruptcy or liquidation. - Legal Impact on Capital Market Transactions
Transactions in capital, money, and forex markets before a bankruptcy ruling must be settled as if bankruptcy had not occurred. Close-out netting agreements are protected and cannot be annulled unless fraud is proven to have happened.
Insurance Sector-Specific Provisions
- Bankruptcy & PKPU Applications
Only OJK can file bankruptcy or PKPU petitions against insurance and reinsurance companies. Creditors may request that the OJK file such petitions, which must be responded to within 30 days. - Preferential Rights of Policyholders
Policyholders, insured parties, and participants have priority claims over other creditors. Insurance funds must first satisfy obligations to these parties before any remaining assets are distributed. - Islamic Insurance Funds
Tabarru, tanahud, and investment funds in Islamic insurance cannot be used to pay claims to non-policyholders.
Other Notable Provisions
- Dissolution of Joint Ventures
Joint ventures are dissolved if their business licenses are revoked following bankruptcy and the liquidation of their assets. - Revocation of Financing Business Licenses
OJK may revoke the licenses of financing service providers if they are dissolved due to bankruptcy. - Pension Fund Claims
Unpaid employer contributions to pension funds are considered immediate debts and preferential claims in bankruptcy. - Repeal of Key Bankruptcy Law Articles
Articles 2 and 223 of the Bankruptcy Law (UU No. 37/2004) are repealed, removing provisions related to bankruptcy and PKPU for certain financial institutions.
UU P2SK centralizes and strengthens regulatory control over bankruptcy and liquidation processes in the financial sector. It ensures legal certainty, consumer protection, and systemic stability by empowering OJK and Bank Indonesia with exclusive authority, prioritizing policyholder rights, and safeguarding financial market transactions.
Implications for Cross-Border Stakeholders
For cross-border creditors, financial institutions, fintech operators, and legal professionals, the reforms introduced by UU P2SK present both challenges and opportunities:
- The regulatory gatekeeping by OJK and Bank Indonesia requires new strategic approaches in enforcing claims or debt restructurings. Cross-border stakeholders must now navigate a centralized legal framework where only designated regulators can initiate bankruptcy or PKPU proceedings.
- Increased protections for retail consumers and e-money users support market confidence and fintech collaboration. This creates a more secure environment for cross-border fintech firms engaging in partnerships or digital payment services in Indonesia.
- Legal certainty in derivatives netting and close-out mechanisms ensures safer participation in Indonesian financial markets. Cross-border financial institutions can benefit from more straightforward rules and enforceable agreements, reducing counterparty risk.
These reforms demonstrate Indonesia’s effort to build a financially resilient and legally transparent economy, providing cross-border companies with greater predictability when working with Indonesian entities.
