Indonesia Deposit Insurance Corporation

The 1998 Asian financial crisis led to a banking crisis in Indonesia, marked by the liquidation of 16 banks and a decline in public trust. The government implemented blanket guarantees on all bank obligations, including customer deposits, as stipulated in Presidential Decree No. 26 of 1998 and Presidential Decree No. 193 of 1998.

In 2004, the Indonesian government issued Law Number 24 of 2004 concerning the Indonesia Deposit Insurance Corporation, which served as the legal basis for the establishment of the Deposit Insurance Corporation (IDIC).

IDIC officially began operations on September 22, 2005.

In 2016, the Indonesian government expanded the mandate of IDIC by issuing Law Number 9 of 2016 concerning Prevention and Handling of Financial System Crisis (PPKSK Law).

In 2017, LPS underwent a transformation to carry out the expanded duties and authorities.

In 2020, the Government issued Law Number 2 of 2020 concerning the Stipulation of Government Regulation in Lieu of Law Number 1 of 2020 concerning State Financial Policies and Financial System Stability for Handling the Coronavirus Disease 2019 (COVID-19) Pandemic, and/or in the Context of Facing Threats that Endanger the National Economy and/or Financial System Stability. Through this law, IDIC has new authorities, including: - Conducting preparations for handling and increasing the intensity of joint preparations with the Indonesia Financial Services Authority (IFSA) for handling solvency problems; - Deciding whether or not to save Non-Systemic Banks by considering criteria other than the lowest cost of rescue, and - Implementing deposit insurance policies for groups of customers by considering the source of funds and/or the purpose of the deposit as well as the amount of the guaranteed value for these customer groups.

IDIC received this authority temporarily through Government Regulation Number 33 of 2020 concerning the Implementation of the Authority of the Deposit Insurance Corporation in Implementing Steps to Handle Financial System Stability Problems, which was issued to support economic recovery due to the COVID-19 pandemic.

In order to support and realize the development and strengthening of the financial sector in Indonesia, the government issued Law Number 4 of 2023 concerning the Development and Strengthening of the Banking Sector (P2SK Law). This law gives IDIC a new mandate to implement the Insurance Guarantee Scheme (IGS), starting five years after the law is enacted. Through this new mandate, it is hoped that it can provide protection for policyholders, insured parties, or participants of insurance companies whose business licenses have been revoked due to financial difficulties. In implementing the Insurance Guarantee Scheme, IDIC functions to guarantee insurance policies and resolve insurance companies through liquidation. In implementing the IGS, IDIC functions to guarantee insurance policies and resolve insurance companies through liquidation. In implementing the IGS, insurance companies that will participate in the program are insurance companies that are declared healthy, and to determine whether the insurance company is healthy or not, IDIC will coordinate with the Indonesia Financial Services Authority (IFSA). Several changes in the P2SK Law compared to the previous law governing IDIC will cover at least eight things. Some of these changes include: - The purpose of IDIC’s existence, which was previously only “to guarantee and protect public funds in banks,” has now been expanded to “guarantee and protect public funds in banks and insurance companies.”