As the World Health Organization announced the Corona Virus Disease 2019 (“Covid-19”) spreads as a global pandemic, it does not take long for countries to bear the repercussions of this pandemic. The government, along with the stakeholders in every sector, are racing against time to be able to mitigate the risks of future potential losses.
The Covid-19 infection cases have been growing exponentially in Indonesia since the first confirmed case on 2 March 2020. In an effort to handle the spreading of the Covid-19, on 31 March 2020, the government implements the large-scale social restriction by issuing the Regulation of the Government of the Republic of Indonesia No. 21 of 2020 on The Large-Scale Social Restrictions for the Acceleration of Mitigation to Corona Virus Disease 2019 (Covid-19) (“GR 21/2020”).
A large-scale social restriction means the restriction of certain activities of the population in an area suspected to be infected by Covid-19 in such a way as to prevent the possibility of the spreading of the Covid-19 (“Large–Scale Restrictions”). In Article 4 Paragraph (1) GR 21/2020, stipulate that the Large-Scale Social Restrictions at least encompass:
- temporary closure of schools and workplaces;
- religion activities restriction; and/or
- public facility or public place activities restriction.
Pursuant to the GR 21/2020, each of Regional Government may perform the Large-Scale Social Restrictions, with the approval from the minister in charge of government affairs in the health sector after considering the epidemiological, the magnitude of the threat, effectiveness, resource supports, operational technicalities, political, economic, social, cultural, and defense and safety.
In order to save the national economy and the stability of the financial system amidst the pandemic, the government issued the Regulation of the Government of the Republic of Indonesia in Lieu of Law No. 1 of 2020 on State Financial Policies and the Stability of the Financial System in Relation to the Handling to the National Economy and/or Stability of the Financial System (“Regulation 1/2020”) dated 31 March 2020.
The Regulation 1/2020 governs, among others, the financial system stability policies that comprise the policies to the handling of the financial institution problems that endanger the national economy and/or financial system stability which are implemented by Bank Indonesia (“BI”), Indonesia Deposit Insurance Corporation/Lembaga Penjamin Simpanan (“LPS”), Indonesia Financial Services Authority/ Otoritas Jasa Keuangan (“OJK”), and the establishment of the Financial System Stability Committee/Komite Stabilitas Sistem Keuangan (“KSSK”). Pursuant to the Regulation 1/2020, in order
to support the tasks of KSSK, BI, OJK, and LPS have been granted several authorities for the purpose of controlling the financial system stability, as follows:
BI has been authorized to (i) provide short-term liquidity financing based on sharia principles to systemic banks or non systemic banks, (ii) provide special liquidity loan to systemic banks that experience liquidity difficulty and fail to fulfill the requirements for the granting of short-term liquidity loan, (iii)buy the Government bond and/or long-term Government sukuk in the primary market for the control of financial system problems that harm the national economy, (iv) buy/repo Government securities that are owned by LPS for the fees in controlling solvability problems of systemic banks and non systemic banks, (v) regulate obligation to receive and use foreign exchange for resident including provisions on foreign exchange transfer, repatriation, and conversion for the purpose of maintaining macroeconomic and financial system stability, and (vi) provide funding access to corporations/private sectors by repo of Government bond or Government sukuk that are owned by corporations/private sectors through banking.
LPS has been authorized to (i) conduct preparation for the control and increase the preparation intensity with the OJK to control banks’ solvability problems, (ii) in the event that LPS is expected to experience liquidity difficulties in controlling failed banks, conduct sale/repo the Government bond that is owned by BI, issuance of bonds, loan to other parties, and/or loan to the government, (iii) conduct decision making to rescue or not to rescue the non-systemic banks, and (iv) formulate and implement deposit insurance policies for a group of customers.
OJK has been authorized to (i) give the mandate to financial service institutions to implement various types of corporate actions, i.e., merger, consolidation, acquisition, integration, and/or conversion, (ii) implement the exemption for certain parties from the mandatory implementation of the transparency principle within the capital market sector in order to the prevent and handle the financial system crisis, and (iii) establish the provisions on the utilization of information technology with respect to the organization of the General Meeting of Shareholders or other relevant meetings under prevailing laws.
Governmental bodies are expected to issue more policies to overcome the impact of the pandemic on the national economy. Those new policies may not be unprecedented to the business entities, such as the e-GMS. More detailed guidance or socialization may need to be issued to ensure that the policies are workable.