Safety Net of The Financial System in The Perspective of Indonesian Banking Law

Abstract

The world’s economic conditions has shown a tendency of recession to re-occur in particular in
developed countries, it is caused due to the worsening global economic and financial conditions that
could have been worse than the crisis conditions of the last 2008. Related to that global financial crisis,
it’s very likely that they have an impact on economic conditions in Indonesia, and the most highly
vulnerable is in banking sector. If this condition (Safety Net) is not anticipated and dealt with seriously
and comprehensively by the Government, it could have an impact on a deep financial crisis. The
condition does not only affect the poor aspects of banking liquidity, but also on the solvency and
profitability of the banking institutions.
Financial Safety Net is one of the main pillars of economic activity, so that with the specific and
explicit arrangement, the occurrence of bank runs can be pursued and prevented, it can minimize the
possibility of a financial crisis, and it can reduce the frequency and impact of economic contraction in
Indonesia.
Given the large number of costs that must be borne by the State in the management and resolution of
crises and the breadth of the impact of the crisis, we need a fine and effective crisis management. A good
and effective crisis management must be supported by a legal framework in the form of legislation and
policies to deal with the crisis that clearly distinguished set of roles, responsibilities and effective
mechanisms of coordination from each related institution to some monetary authorities in the Safety Net.
Crisis management also needs to be supported by the organization and effective leadership so that they
can develop strategies and crisis management measures quickly and effectively in the event of a crisis.