Here's The Role And Function Of LPS After The Issuance Of The P2SK Law

Executive Director of Claims and Resolution of Bank LPS Suwandi (Photo: Doc. LPS)

JAKARTA - The Deposit Insurance Corporation (LPS) was established in 2004 through Law (UU) Number 24 of 2004 concerning the Deposit Insurance Corporation, and officially operated on September 22, 2005.

LPS has so far metamorphized in terms of its role and function to maintain national financial stability.

"Initially, LPS only had a guarantee function and was actively involved in maintaining the stability of the banking system according to its authority. However, since the 2023 Financial System Development and Strengthening Law (UU P2SK) was issued, LPS will carry out new powers and responsibilities," said Executive Director of Claims and Resolution of Bank Suwandi during the media gathering in Bandung, quoted on Saturday, November 11.

In addition to the function of guarantee and function of maintaining the stability of the banking system, he continued, LPS will also carry out the function or insurance policy guarantee program according to its authority.

Suwandi explained, in 2023 after the ratification of the Law on the Development and Strengthening of the Financial System (UU P2SK), LPS was also mandated as the organizer of the Policy Guarantee Program (PPP) to protect policyholders, beneficiaries or participants from insurance companies revoked their business licenses due to financial difficulties.

Later, in the implementation of PPP, LPS will function to guarantee insurance policies and to resolve insurance companies by liquidation.

PPP will take effect 5 years after the P2SK Law is promulgated, or in 2028.

"We have started running, the organizational structure has also been built, then we have started mapping all the regulations and increasing capacity has also begun to be carried out. We are waiting for Government Regulations first, because later the derivative regulations will come from there. Ideally, a year before 2028 everything will be ready," he said.

In the P2SK Law related to bank guarantees and resolutions, LPS is also equipped with bank resolution instruments, including through a liquidation mechanism or resolution method by selling assets belonging to Bank Dalam Resolution (BDR) to complete the obligations of the bank.

Another option is with Temporary Capital Participation (PMS) or providing additional capital to BDR with the aim of being saved.

Then, Purchase and Assumption or transfer part or all assets and/or BDR obligations to the recipient bank. And lastly, the option of temporary transfer via the Bridge Bank method or transfer part or all assets and/or BDR obligations to Bank Perantara or banks founded by LPS.