Government Regulation Number 11 of 2026 Governs the Forced Takeover of Failed Banks by the Indonesia Deposit Insurance Corporation

Introduction

On 11 March 2026, the Government issued Government Regulation Number 11 of 2026 on the Placement of Funds in Banks and the Exercise of Authority in the Implementation of the Banking Restructuring Program by the Indonesia Deposit Insurance Corporation (“GR 11/2026”), which took effect on that date. This regulation aims to govern the authority of the Indonesia Deposit Insurance Corporation (“IDIC”) in handling banks experiencing liquidity problems and in administering the Banking Restructuring Program (“BRP”).

GR 11/2026 serves as an implementing regulation derived from Law Number 9 of 2016 on the Prevention and Mitigation of Financial System Crises, as amended by Law Number 4 of 2023 (Financial Sector Development and Strengthening Law). This regulation addresses the need for swift handling of banking liquidity issues and provides instruments for the IDIC to act decisively, including placing funds to prevent bank failure and assuming full control over the management of troubled banks.

 

Key Provisions

Requirements and Mechanism for IDIC Fund Placement

The IDIC is authorized to place funds in Systemic Banks as well as non-Systemic Banks that are undergoing recovery due to liquidity issues. Pursuant to Articles 6 and 9, banks requiring funds must first submit an application to the Financial Services Authority (“FSA”) after the bank no longer meets the requirements to obtain liquidity loans from Bank Indonesia. Article 9 requires the bank and its controlling shareholders to submit key documents and provide eligible asset collateral. Under Article 10, such collateral includes highly rated securities, performing loan assets, or fixed assets, accompanied by personal guarantees from the controlling shareholders. The FSA subsequently conducts a feasibility assessment before requesting the IDIC to execute the fund placement.

Limitations and Supervision of Recipient Banks

Banks receiving funds from the IDIC are subject to supervision and restrictions imposed by the IDIC. Article 17 stipulates that the IDIC may place funds for a maximum period of 90 calendar days and may extend such period up to three times. During this period, Article 26 prohibits banks from extending new credit to related parties, executing withdrawals by related parties, and distributing dividends. Furthermore, Articles 20 and 25 provide that the IDIC has the authority to appoint statutory managers who may assume all functions of the board of directors and board of commissioners, cancel detrimental contracts, and control the bank’s business activities to prevent customer losses.

Takeover under the BRP

If the President declares the implementation of the BRP due to a financial system crisis, the IDIC shall take over banks that meet the criteria as BRP Participant Banks. Under Article 35, the IDIC assumes all rights of shareholders, the General Meeting of Shareholders (GMS), the board of directors, and the board of commissioners immediately after the FSA transfers the bank. The IDIC then takes control of all bank assets and is authorized to enforce debt collection. Pursuant to Articles 52 and 53, the IDIC may issue a Writ of Execution ordering debtors to settle their obligations within 24 hours. If the debtor fails to comply within this timeframe, Article 55 authorizes the IDIC to seize all assets of the debtor and guarantor without undergoing a lengthy court process.

Authority to Terminate Third-Party Contracts

The IDIC is authorized to evaluate and terminate legal relationships between BRP Participant Banks and external parties. Under Article 66, the IDIC may review, amend, cancel, or terminate any contract between the bank and third parties if it determines that such contract is detrimental to the bank. The IDIC exercises this authority by issuing an official decision to cancel or amend the contract and notifying the relevant third party through registered mail or other delivery methods.

Restructuring Scheme and Loss Allocation

Pursuant to Articles 67 and 68, the IDIC is authorized to calculate the bank’s losses and allocate such losses to reduce the bank’s capital. If the capital becomes negative, the IDIC may eliminate existing share ownership without compensation through a share write-off mechanism. In addition, Article 73 provides that the IDIC may restore the bank’s condition by converting certain liabilities or debts owed to creditors into equity, thereby changing the status of such creditors into shareholders under the IDIC’s control.

Suspension of Bank Obligations (Moratorium)

The IDIC may suspend cash outflows by deferring the payment of obligations of BRP Participant Banks to creditors or other parties. Under Article 76, the IDIC may take such action if it is necessary to support liquidity and bank recovery or if the obligations are indicated to arise from negligence of management, shareholders, or criminal acts. Article 76 further specifies that the suspension applies to the following parties:

1. Members of the board of directors, board of commissioners, or equivalent organs, as well as shareholders of BRP Participant Banks; 
2. Parties affiliated with controlling shareholders of BRP Participant Banks; 
3. Parties causing losses to BRP Participant Banks as a result of civil relationships; and 
4. Obligations reasonably suspected to originate from criminal acts. 

The IDIC may impose the suspension of payment obligations for a maximum period of 6 months and may extend such suspension once.

Threat of Seizure of Personal Assets of Management and Shareholders

Articles 94 and 95 affirm that the IDIC will allocate bank losses to members of the board of directors, commissioners, or shareholders proven to have committed fault or negligence. Article 96 stipulates that the IDIC may freeze the personal assets of such management and shareholders, both domestically and abroad. If they refuse to compensate for the losses, the IDIC will transfer the settlement process to the competent authority responsible for state receivables or to law enforcement agencies.

 

Transitional Provisions

Article 104 provides that all previous laws and regulations relating to the exercise of IDIC authority and the prevention and handling of financial system crises shall remain in effect, provided that their substance does not conflict with the new provisions under GR 11/2026.

 

Closing

GR 11/2026 strengthens the authority of the IDIC to act swiftly and decisively in handling troubled banks and administering the BRP. Through this regulation, the IDIC is equipped with robust instruments, including the placement of emergency funds under strict supervision and the appointment of statutory managers, the immediate forced takeover of shareholder rights and bank management, and unilateral authority to cancel detrimental third-party contracts and suspend bank payment obligations (moratorium). Furthermore, to safeguard financial system stability, the IDIC may enforce debt collection within 24 hours and seize assets without prolonged court proceedings, restore banks by converting debt into equity and eliminating existing shares without compensation, and freeze the personal assets of management and shareholders proven to be negligent and responsible for losses.