{
  "title": "Indonesia: Financial Sector Assessment Program-Detailed Assessment of Observance-Basel Core Principles for Effective Banking Supervision",
  "publication": "IMF Staff Country Reports, August 13, 2024",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2024/08/13/indonesia-financial-sector-assessment-program-detailed-assessment-of-observance-basel-core-553355",
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  "summary": "This paper presents a Detailed Assessment of Observance of the Basel Core Principles for Effective Banking Supervision for the Indonesia Financial Sector Assessment Program.",
  "sections": [
    {
      "heading": "Executive summary and main findings",
      "content": "- The paper presents a Detailed Assessment of Observance of the Basel Core Principles for Effective Banking Supervision for the Indonesia Financial Sector Assessment Program.\n- The Financial Services Authority (OJK) achieves good baseline supervision; building supervisory capacity and enhancing the supervisory framework will contribute to achieving higher supervision standards.\n- It is crucial for legislation to recognize the safety and soundness of banks and the banking sector as the OJK’s primary responsibility, given its broader mandates.\n- The OJK is encouraged to continue to examine banks’ evolving business models to identify changing risk profiles early.\n- There is further scope for the OJK to dedicate more attention to assessing a bank’s risk culture, model governance and stress testing.\n- There is scope for more analysis of models, model governance, model validation, and the role of the independent risk management unit to verify and validate the results.\n- Material enhancements are needed to effectively mitigate the risks associated with related party transactions and potential sources of concentration risk.\n- While the OJK has broad powers for corrective measures, a portfolio view of noncompliance with regulations will help address early unsafe and unsound practices."
    },
    {
      "heading": "Policy recommendations and supervisory priorities",
      "content": "- Strengthen legislative recognition that the OJK’s primary responsibility includes the safety and soundness of banks and the banking sector.\n- Build supervisory capacity and enhance supervisory frameworks to move beyond good baseline supervision toward higher standards.\n- Increase supervisory focus on:\n  - Evolving bank business models to detect changing risk profiles early.\n  - Assessment of bank risk culture.\n  - Model governance, model validation, and analysis of models.\n  - Stress testing practices and the role of independent risk management units in verification and validation.\n- Implement material enhancements to mitigate risks from related party transactions and sources of concentration risk.\n- Use a portfolio view of noncompliance with regulations to detect and address early unsafe and unsound practices despite broad corrective powers."
    },
    {
      "heading": "Subject coverage and keywords",
      "content": "- Subject: Anti-money laundering and combating the financing of terrorism (AML/CFT), Bank supervision, Credit risk, Crime, Financial regulation and supervision, Financial sector policy and analysis, Financial sector stability, Market risk\n- Keywords: Anti-money laundering and combating the financing of terrorism (AML/CFT), bank Indonesia rupiah securities, bank rating, Bank supervision, banking segment, Credit risk, Financial sector stability, Global, IMF-World Bank Financial Sector Assessment Program, Market risk, staff team of the International Monetary Fund"
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      "content": "- Publication date: August 13, 2024\n- Series: Country Report No. 2024/273\n- Volume: 2024\n- Issue: 273\n- Pages: 238\n- DOI: https://doi.org/10.5089/9798400286216.002\n- ISBN: 9798400286216\n- ISSN: 1934-7685\n\nInternational Monetary Fund. Monetary and Capital Markets Department \"Indonesia: Financial Sector Assessment Program-Detailed Assessment of Observance-Basel Core Principles for Effective Banking Supervision\", IMF Staff Country Reports 2024, 273 (2024).\n\n---\n\n Content in this bundle\n\n- 1idnea2024004-print-pdf\n  - 1idnea2024004-print-pdf (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1idnea2024004-print-pdf (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: August 13, 2024",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9798400286216.002",
    "The paper presents a Detailed Assessment of Observance of the Basel Core Principles for Effective Banking Supervision for the Indonesia Financial Sector Assessment Program.",
    "The Financial Services Authority (OJK) achieves good baseline supervision; building supervisory capacity and enhancing the supervisory framework will contribute to achieving higher supervision standards.",
    "It is crucial for legislation to recognize the safety and soundness of banks and the banking sector as the OJK’s primary responsibility, given its broader mandates.",
    "The OJK is encouraged to continue to examine banks’ evolving business models to identify changing risk profiles early.",
    "There is further scope for the OJK to dedicate more attention to assessing a bank’s risk culture, model governance and stress testing.",
    "There is scope for more analysis of models, model governance, model validation, and the role of the independent risk management unit to verify and validate the results.",
    "Material enhancements are needed to effectively mitigate the risks associated with related party transactions and potential sources of concentration risk.",
    "While the OJK has broad powers for corrective measures, a portfolio view of noncompliance with regulations will help address early unsafe and unsound practices.",
    "Strengthen legislative recognition that the OJK’s primary responsibility includes the safety and soundness of banks and the banking sector.",
    "Build supervisory capacity and enhance supervisory frameworks to move beyond good baseline supervision toward higher standards.",
    "Increase supervisory focus on:",
    "Implement material enhancements to mitigate risks from related party transactions and sources of concentration risk.",
    "Use a portfolio view of noncompliance with regulations to detect and address early unsafe and unsound practices despite broad corrective powers.",
    "Subject: Anti-money laundering and combating the financing of terrorism (AML/CFT), Bank supervision, Credit risk, Crime, Financial regulation and supervision, Financial sector policy and analysis, Financial sector stability, Market risk",
    "Keywords: Anti-money laundering and combating the financing of terrorism (AML/CFT), bank Indonesia rupiah securities, bank rating, Bank supervision, banking segment, Credit risk, Financial sector stability, Global, IMF-World Bank Financial Sector Assessment Program, Market risk, staff team of the International Monetary Fund",
    "Publication date: August 13, 2024",
    "Series: Country Report No. 2024/273",
    "Volume: 2024",
    "Issue: 273",
    "Pages: 238",
    "DOI: https://doi.org/10.5089/9798400286216.002",
    "ISBN: 9798400286216",
    "ISSN: 1934-7685",
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