Case | HBS Case Collection | March 2013 (Revised August 2014)

Indonesia's OJK: Building Financial Stability

by Lakshmi Iyer and David Lane

Abstract

In 2013, a new financial services authority, the Otoritas Jasa Keuangan (OJK), took over responsibility for regulating capital markets and non-bank financial institutions in Indonesia. OJK was scheduled to take over bank regulation and supervision from the central bank, Bank Indonesia, in 2014. At a time when there was no global consensus on the optimality of separating monetary policy from bank supervision, the creation of the OJK raised many questions. Would the OJK better prepare Indonesia to deal with financial crises? Could an organization whose leaders came from Indonesia's existing economic bureaucracies remain independent of those organizations and from political pressures? Was the creation of the OJK the correct response to public dissatisfaction with Bank Indonesia's handling of the Asian financial crisis and subsequent corruption scandals?

Keywords: monetary policy; bank regulation; financial market regulation; corruption; bureaucracy; central bank independence; emerging markets; Indonesia; Crime and Corruption; Central Banking; Emerging Markets; Financial Markets; Corporate Governance; Financial Strategy; Financial Services Industry; Indonesia;

Citation:

Iyer, Lakshmi, and David Lane. "Indonesia's OJK: Building Financial Stability." Harvard Business School Case 713-003, March 2013. (Revised August 2014.)