A judicial review hearing of Law on Financial Sector Development and Reinforcement being postponed, Monday (10/21/2024). Photo by MKRI/Panji.

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JAKARTA (MKRI) — The Constitutional Court (MK) postponed a judicial review hearing of Law No. 4 of 2023 on the Financial Sector Development and Reinforcement (P2SK Law). The case No. 85/PUU-XXII/2024 was filed by two lecturers and one university student.

Today, Monday, October 21, 2024, the Court should have heard the House of Representatives (DPR) or the Bank of Indonesia (BI), the Financial Services Authority (OJK), and the Deposit Insurance Corporation’s (LPS). However, BI and OJK stated that they had not completed their written testimony. Meanwhile, LPS had only submitted theirs the day before, while the House was absent from the hearing.

“We have discussed at a justice deliberation meeting earlier as the LPS’ testimony was only submitted yesterday. So, we decided that it would be presented along with that of other Relevant Parties at the next hearing,” said Deputy Chief Justice Saldi Isra, who chaired the plenary hearing.

He announced that the hearing was adjourned and will commence on Monday, October 28, 2024 at 13:30 WIB. He urged BI and OJK to prepare their written testimony and submit it by Friday, October 25.

“This postponement announcement also serves as notification for all parties—the Petitioners, the President, and the Relevant Parties. We would not need to put out another notification or summons for the next hearing,” he said.

The Ministry of Finance’s advisor for financial services and capital market Arief Wibisono testified on behalf of the President/Government on Monday, October 7. He said the LPS’ independence is maintained despite the Minister of Finance having the authority to approve the LPS’ operational annual work plan and budget (RKAT).

“The Minister of Finance’s approval of the LPS’s operational RKAT is unrelevant to the decisions, policies, or actions that the LPS take, so its independence in decision-making remains,” said at the hearing, when the Court was supposed to hear the House and the President. The House did not attend the hearing and requested a reschedule.

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The Petitioners—two lecturers and one university student—challenge Article 7 points 6 and 57; Article 86 paragraphs (4), (6), and (7) letter a; and Article 276 points 3, 13, and 24 in Law No. 4 of 2023 on the Financial Sector Development and Reinforcement (P2SK Law). Giri Ahmad Taufik (Petitioner I) is a constitutional law lecturer at Djuanda University in Bogor while Wicaksana Dramanda (Petitioner II) is a constitutional law lecturer at the Islam University of Bandung. Mario Angkawidjaja (Petitioner III) is a university student and customer of microcredit bank (BPR) Nusantara Bona Pasogit (NBP) 31 Jatinangor.

They argue that there is potential constitutional impairment due to the enforcement of the article, which authorize the LPS to be able to place funds in banks under restructuring based on requests from the Financial Services Authority (OJK), which could potentially overlap with the authority of Bank Indonesia (BI) as the lender of last resort.

Moreover, the authority of LPS in placing funds in banks under restructuring has different requirements that are easier, in this case, those that do not meet the Short-Term Liquidity Loans based on Sharia principles owned by BI. As a result of this vagueness and overlap, there is the potential to burden LPS, in this case reducing its ability and leading to the failure of LPS to carry out its main function, namely guaranteeing customer deposits, which is a form of protection of the Petitioners’ deposits.

In addition, the Petitioners believe government intervention in the form of the Minister of Finance’s approval of the LPS annual work plan and budget in these articles raises legitimate doubts on the customers’ side regarding the legal certainty that the LPS will exercise its authority professionally and based on expertise alone, without political interference. Although independence has accountability limits, the Minister of Finance’s approval authority in these provisions lacks the basis of necessity and balancing.

In terms of necessity and balance, the highly interventionist provisions on work and financial planning for LPS operational activities do not have a strong reason, considering the institutional design of LPS, which is led collectively collegially by all members of the board of commissioners, where all LPS decisions must be made through a process of deliberation for consensus (vide Article 7 point 46 of Law No. 4 of 2023, which amends Article 72 paragraph (1) of Law No. 24 of 2004).

In their petitums, the Petitioners request that the Court nullify Article 7 points 57 of Law No. 4 of 2023, which amends the phrase “to obtain approval” in Article 86 paragraph (4) of Law No. 24 of 2004; and the phrase “who has obtained the approval of the Minister of Finance” in Article 86 paragraph (7) letter a of Law No. 24 of 2004. In addition, they request that Article 7 point 6 and Article 276 point 13 be declared unconstitutional and not legally binding. 

Author         : Mimi Kartika
Editor          : Nur R.
PR               : Fauzan F.
Translator     : Yuniar Widiastuti (NL)

Disclaimer: The original version of the news is in Indonesian. In case of any differences between the English and the Indonesian versions, the Indonesian version will prevail.

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