The Role of Bank Corporate Governance in Preventing Banking Crisis

Gabrielia Febrianty Shofiana,Abd. Shomad

The crisis faced in year 1998 has caused Indonesia to establish a new paradigm of corporate governance in banking sector, which is known as Bank Corporate Governance. The paradigm encouraged banking activities development as principle of prudence manifestation. The Corporate Governance Bank is also supported by another embodiment of prudential principles such as Legal Lending Limit (BMPK) and Risk Management. Based on Law No. 9 of the year 2016 concerning Prevention and Management of the Financial System Crisis, a new concept bail-in during crisis has been introduced. The concept was introduced as a bail-out replacement previously applied by the Government in handling Century Bank case with revocation of Article 11 paragraph (4) and (5) of Bank Indonesia Act. The bail-in concept had emphasized bank funding handling which sourced from the bank. Meanwhile, Law number 9 of 2016 did not distinguish settlement mechanism limited to private bank or state-owned enterprises. Hence, the bail-in concept is applicable to replace bail-out that applied both to private banks and stateowned banks with reference to Law number 9 of 2016 and other applicable regulations.

Volume 11 | 05-Special Issue

Pages: 1252-1256