The P2SK Law Changes The Role Of LPS Not Just Becoming A 'Chairline'

LPS (Photo: dock. Antara)

JAKARTA - The Law (UU) on the Development and Strengthening of the Financial Sector (P2SK) passed by President Joko Widodo on January 12, 2023, increasingly strengthens the role of the Deposit Insurance Corporation (LPS).

Deputy Chairman of the Board of Commissioners of the Deposit Insurance Corporation (LPS) Lana Soelistianingsih said, with the law, LPS can then place its funds in the bank in order to save and restore banks that are'sick'.

"In the past, LPS at the beginning of its formation was only a cashier or a paybox, in 2023 with the P2SK Law, LPS had a greater mandate as a risk minimizer. LPS prevented and minimized risks," Lana said at the Bloomberg Technoz Economic Outlook 2024, Wednesday 7 February.

Lana explained, if a bank fails, LPS will coordinate with the Financial Services Authority (OJK). The OJK will first identify whether the bank is no longer entitled to a short-term loan facility from Bank Indonesia (BI), thus OJK will then recommend LPS to place its funds in the failed bank in order to support solvability.

"But of course, with the analysis of this bank, we still have a going concern going forward. With these recommendations, LPS will review how much of the placement of funds and goods if this bank cannot return and other things that must be reviewed in that context," explained Lana.

Thus, Lana continued, the role of LPS is no longer just being a'review' to make sick banks healthy but also play a role in restoring these banks.

"Indeed, now the scope of LPS's responsibility is getting bigger, but the framework for doing the resolution is also increasingly limited," concluded Lana.