Indonesia's new financial crisis law carries risks

Abstract

Subject The new financial crisis management law. Significance On March 17, parliament approved the long-awaited 'Financial System Crisis Prevention and Mitigation' bill. For the first time, Indonesia has a law on financial crisis management that will provide the legal basis for regulatory authorities to respond better to future financial crises. Impacts Government preparedness to manage a financial crisis will rise, albeit gradually. Political stalemate during a crisis, especially in parliament, would prevent effective and timely action by the president. The Deposit Insurance Corporation has limited capitalisation and may not be strong enough to manage more than two large troubled banks.