Law Number 4 of 2026 Strengthens National Financial System Stability

Introduction

On 17 June 2026, President Prabowo Subianto enacted Law Number 4 of 2026 on Amendments to Law Number 4 of 2023 on Financial Sector Development and Strengthening (“Law 4/2026”), which came into effect on the same date. Law 4/2026 seeks to strengthen the resilience of the national economy through a more integrated, adaptive, and sustainable financial sector development and strengthening framework. This Law was enacted to reorganize the institutional framework of regulatory and supervisory authorities in the financial sector (the Ministry of Finance, Bank Indonesia (“BI”), the Financial Services Authority (“OJK”), and the Indonesia Deposit Insurance Corporation (“LPS”)) and to address current legal needs of society. The Government recognizes the need to improve the administration of the financial services sector so that it becomes more orderly, fair, transparent, accountable, and capable of strongly protecting the interests of consumers and the public amidst the dynamics of the digital economy.

Comparison

Law 4/2026 amends a number of provisions under Law Number 4 of 2023 on Financial Sector Development and Strengthening (“Law 4/2023”). The following table compares Law 4/2026 and Law 4/2023:

Key Provisions

Strengthening the Authority of the Indonesia Deposit Insurance Corporation (LPS)

Article 7 expands the functions and authority of LPS. LPS is no longer focused solely on the resolution of banking entities but is also authorized to undertake resolution actions for Insurance Companies and Sharia Insurance Companies. In carrying out such functions, LPS is authorized to formulate, determine, and implement resolution preparation measures, conduct due diligence, and execute policies for troubled or failed insurance entities.

Expansion of the Jurisdiction of the Financial Services Authority (OJK)

Pursuant to Article 8, the scope of OJK’s regulatory and supervisory duties has been expanded. OJK supervises the banking, capital markets, insurance, and financing institution sectors. OJK is also authorized to supervise Financial Sector Technology Innovation (ITSK), which includes digital financial assets and crypto assets, carbon exchanges, mineral exchanges, and the conduct of financial services businesses (market conduct). In addition, OJK is the sole authority authorized to file bankruptcy petitions or applications for Suspension of Debt Payment Obligations (PKPU) against financial institutions under its supervision, including banks, insurance companies, joint funding fintech providers, crypto asset traders, and digital financial asset issuers.

Adjustment of the Duties of Bank Indonesia (BI)

Under Article 9, the objectives and duties of Bank Indonesia are adjusted to achieve Rupiah stability, maintain Payment System stability, and contribute to safeguarding Financial System Stability in support of sustainable economic growth.

Performance Assessment and Evaluation by the House of Representatives (DPR)

Pursuant to Article 9A, based on institutional performance reports, the DPR may conduct performance evaluations of LPS, OJK, and BI. Such evaluations are carried out by the DPR committee responsible for finance, national development planning, monetary affairs, and the financial services sector, and are submitted to the leadership of the DPR in the form of recommendations.

Legal Protection & Institutional Oversight

Article 35E regulates legal protection for leaders and employees, including officials, institutional leaders (the Boards of Commissioners of LPS/OJK and the Board of Governors of BI), and employees of LPS, OJK, and BI, whereby they are entitled to legal protection when carrying out their duties in good faith and in accordance with prevailing laws and regulations.

Additional Regulation Concerning Margin Transfer in Financial Market Transactions Through a Transfer of Title Mechanism

Pursuant to Article 39A, in ensuring the settlement of transactions in financial markets, transaction participants shall provide initial margin as collateral and/or conduct margin transfers. Margin transfers are carried out through a transfer of title over the margin used to fulfill obligations arising from changes in transaction value, insofar as required or agreed upon in the relevant agreement. The criteria that must be fulfilled in connection with margin transfers are regulated under Article 39A paragraph (3).

Strengthening the Crypto Asset Industry

This is reflected through the recognition and clearer regulation of Digital Financial Asset Financial Services Institutions, namely institutions conducting business activities in the field of crypto assets and other digital financial assets. In addition, Law 4/2026 introduces Crypto Asset Financial Services Institutions (Crypto Asset FSIs) as institutions conducting activities in the digital financial asset sector related to crypto assets. Further provisions concerning business activities, supervision, and institutional aspects relating to crypto assets are regulated under Article 221A.

Refinement of the Regulation Concerning Mandatory Road Traffic Accident Compensation Funds

Article 52A provides that any person who suffers death, injury, and/or permanent disability as a result of a road traffic accident caused by and/or involving road transportation vehicles, or such person’s heirs, shall be entitled to compensation sourced from a fund in an amount determined by Government Regulation.

Regulation of Inquiry and Investigation in the Financial Services Sector and the Restorative Justice (RJ) Mechanism

Article 100A regulates law enforcement in the Capital Market sector by emphasizing the principle of restorative justice, which focuses on efforts to restore or remedy conditions resulting from a violation while still ensuring a deterrent effect for the offender.

Establishment and Strengthening of the Task Force Responsible for Preventing and Handling Unauthorized Business Activities in the Financial Sector

Article 247 regulates the protection of public interests by mandating the establishment of a task force responsible for preventing and addressing unauthorized business activities in the financial sector and/or licensed business activities where there are indications of violations of collection mechanisms, misuse of data, and/or violations of consumer protection laws and regulations.

Regulation of Strategic Mineral and Commodity Exchanges

Strategic mineral and commodity exchanges are regulated under Chapter XIA. Pursuant to Article 132A, a strategic mineral and commodity exchange is an organized and integrated market system that facilitates the trading of minerals and strategic commodities, including their derivatives, supported by financing ecosystems and digital-based financial instruments with mechanisms for pricing, quality standards, transaction settlement, and risk management. Such exchanges are regulated and supervised by OJK to strengthen economic resilience, maintain market integrity, and optimize the added value of Indonesia’s natural resources and commodities.

Transitional Provisions

Indonesia Deposit Insurance Corporation (LPS)

• DPR Approval of the Annual Work Plan and Budget: The provision concerning DPR approval of the annual work plan and budget for LPS operational activities (under Article 86 point 25 of Article 7) shall take effect for Fiscal Year 2027.

• Approval Deadline: DPR approval for Fiscal Year 2027 shall be granted no later than 31 December 2026.

• Tax Provisions: The provision concerning levies exempted from income tax (under Article 37 paragraph (3) point 39 of Article 8) shall take effect with respect to levies imposed in 2027.

• Policy Guarantee Program: The implementation of the policy guarantee program shall take effect no later than January 2028.

• Rescue Measures: The provisions concerning actions by LPS in rescuing Insurance Companies and Sharia Insurance Companies Under Resolution (under point 5 letters a–h) shall take effect on 1 January 2030.

Financial Services Sector Task Force

• Establishment: The task force for handling unauthorized business activities in the financial services sector (under Article 247) must be established within no later than one year from the promulgation of the Law, namely by 17 June 2027.

• Transitional Status: Existing task forces shall continue carrying out their duties until the newly established task force becomes operational.

Strategic Mineral and Commodity Exchanges

• Operations: Strategic mineral and commodity exchanges (Article 132A) shall be established and commence operations on 1 January 2027.

• OJK Authority: The regulation and supervision of transactions shall be carried out by OJK starting from 1 January 2027.

• Phased Transfer: The phased transfer of authority from Bappebti to OJK shall be regulated under an OJK Regulation following consultation with the DPR and must be enacted no later than September 2026.

• Institutional Arrangement: The Executive Head of Supervision for Strategic Mineral and Commodity Exchanges shall be appointed in accordance with prevailing laws and regulations, and upon such appointment, the incumbent Chairperson of the Audit Board shall be deemed dismissed.

Digital Financial Assets and Crypto Assets

• Recognition of Licenses: Operators that obtained licenses/approvals prior to the transfer of authority to OJK, as well as those obtaining licenses after the transfer, shall be recognized as Crypto Asset FSIs and Digital Financial Asset FSIs in accordance with this Law.

• Validity of Licenses: Crypto Asset FSIs and Digital Financial Asset FSIs that were licensed prior to the enactment of this Law shall be deemed to hold licenses under this Law.

• Exchange Obligations: Crypto asset exchanges and digital financial asset exchanges must conduct trading activities in accordance with Article 221A paragraph (1) letter b and Article 221F no later than 17 June 2027.

Closing

The enactment of Law 4/2026 forms part of the Government’s efforts to strengthen the foundation of the national financial sector so that it becomes more responsive to economic and technological developments. Through improvements to the institutional regulatory framework of the financial sector and the strengthening of the legal framework governing various modern financial activities and instruments, this Law is expected to enhance supervisory effectiveness, strengthen financial system stability, and promote sustainable economic growth.

Furthermore, the strengthening of consumer protection and law enforcement reflects the Government’s commitment to creating a healthy, transparent, and accountable financial sector. Accordingly, businesses, financial services institutions, and other stakeholders should carefully review the various changes introduced by Law 4/2026 to ensure compliance with the applicable provisions and to anticipate any legal and operational implications that may arise.