EXPANSION OF BANK INDONESIA’S AUTHORITY IN FOREIGN EXCHANGE REPORTING THROUGH REGULATION 9/2024
To support the overall stability of the rupiah, Bank Indonesia (“BI”) recently issued Bank Indonesia Regulation No. 9 of 2024 concerning the Management of Foreign Exchange Transactions (“LLD”) (“Regulation 9/2024”), which has been in effect since 23 December 2024.
In broad terms, the structure of LLD management introduced in Regulation 9/2024 aims to support the stability of the rupiah, maintain macroeconomic stability, and ensure smooth investment and payment flows with foreign parties. In addition, BI is required to implement LLD with prudence, in line with the implementation of sound macroeconomic policies. This management must also adhere to the following principles:
- Comply with applicable laws and regulations;
- Serve as a basis for BI’s policy formulation and coordination with the government in managing LLD; and
- Act as a guideline for implementing national LLD management.
This 9th edition of SWILU highlights the key provisions of Regulation 9/2024 as follows:
LLD Management Framework
BI targets three key aspects in managing LLD: volume, composition, and volatility. These targets aim to optimize the benefits of implementing LLD while managing associated risks. Furthermore, the scope of management is categorized into four (4) transactional activities as follows:
- Current account transactions;
- Capital account transactions;
- Financial account transactions; and
- Other foreign exchange transactions as determined by BI.
Reporting, Monitoring, and Supervising of LLD
Under Regulation 9/2024, the parties required to provide information and data related to LLD activities have been clarified. These include Banks, Non-Bank Financial Institutions, Non-Financial Business Entities, Other Entities, and Individuals (collectively referred to as “Residents”). Residents who fail to fulfill their reporting obligations may face administrative sanctions, ranging from written warnings to other penalties as determined by BI.
Regarding LLD reporting obligations, BI holds the authority to regulate reporting mechanisms to ensure the delivery of high-quality data and information. This data can then be utilized for policy formulation and disseminated through designated media. Beyond its supervisory mandate, BI is also responsible for monitoring LLD developments by utilizing data and statistics sourced from Resident reports. The results of this monitoring will form part of an integrated assessment of the benefits and risks of LLD, conducted in line with predefined objectives.
Policy Response
Regulation 9/2024 also clarifies that Bank Indonesia (BI) is responsible for determining policy responses aimed at managing LLD to optimize overall benefits and mitigate risks associated with LLD. These policy responses will be enforced and must be adhered to by all parties involved in LLD activities. It is important to note that parties failing to comply with these policy responses may face administrative sanctions, ranging from written warnings to other forms of administrative penalties as determined by BI.
Coordination
Regulation 9/2024 further emphasizes that, to optimize the benefits and manage the risks of LLD, BI will coordinate with authorities, institutions, and/or other relevant parties. Under normal financial system stability conditions, coordination may be conducted in the following ways:
- Coordination of monetary and fiscal policies;
- Coordination of policies to maintain financial system stability;
- Coordination of policies to ensure smooth trade and financing of the national economy; and/or
- Other types of policy coordination.
In general, Regulation 9/2024 is expected to provide clearer legal certainty for all activities related to LLD. Additionally, this regulation aims to strengthen BI’s authority in managing LLD comprehensively while ensuring recognition of this authority by all relevant parties. Furthermore, the public is urged to pay attention to all obligations stipulated in Regulation 9/2024 to avoid administrative sanctions.
For legal assistance from SW Counselors at Law, please contact:
Fanny
T. (+6221) 2222-0200
E. [email protected]
Bella
T. (+6221) 2222-0200
E. [email protected]
