One of the Petitioners at the ruling hearing for Decision No. 85/PUU-XXII/2024 on the judicial review of Law No. 4 of 2023 on the Development and Reinforcement of the Financial Sector, Friday (1/3/2025). Photo by PR/Bayu.

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JAKARTA (MKRI) — The Constitutional Court (MK) held the ruling hearing for Decision No. 85/PUU-XXII/2024 on the judicial review Number 4 of 2023 concerning the Development and Reinforcement of the Financial Sector (UU P2SK) on Friday, January 3, 2025 in the plenary courtroom. The petition was filed by Giri Ahmad Taufik, Wicaksana Dramanda, and Mario Angkawidjaja. In its verdict, the Court partly granted the petition and declared Article 86 paragraph (4) of the P2SK Law conditionally unconstitutional.

“[The Court] declares the phrase ‘to obtain approval’ as contained in Article 86 paragraph (4), the phrase ‘the Minister of Finance grants approval’ as contained in paragraph (6), and the phrase ‘which has obtained 463 approvals from the Minister of Finance’ as contained in paragraph (7) letter a in Article 7 point 57 of Law No. 4 of 2023 on the Development and Reinforcement of the Financial Sector (State Gazette 2023 No. 4, Supplementary of the State Gazette No. 6845) unconstitutional and not legally binding as long as it is not interpreted as ‘DPR approval’ and it applies after the legislators make changes within no more than two years since the a quo decision is pronounced,” said Chief Justice Suhartoyo while reading the verdict.

The legal reason underlying the Court to grant the petition is because of the importance of the independence of the Deposit Insurance Corporation (LPS) and its freedom from other institutions’ intervention, in this case the Minister of Finance—who is a government institution.

“Even though the role or involvement of the Minister of Finance in the preparation of the RKAT for LPS operational activities is required, the Court argues that it is inappropriate if it is in the form of ‘approval’. Within reasonable reasoning, the provisions in Article 86 paragraph (4), paragraph (6), and paragraph (7) letter a in Article 7 point 57 of Law No. 4 of 2023, which require the ‘approval’ of the Minister of Finance in the preparation of the RKAT for LPS operational activities could potentially reduce LPS’s independence in making decisions,” said Justice Enny reading the Court’s legal considerations.

Importance of LPS’s Independence

In the legal considerations delivered by Constitutional Justice Guntur Hamzah, the Court stated that the LPS’ independence is imperative in ensuring the effectiveness of its functions and duties as a guardian of financial stability, primarily in guaranteeing customer deposits. LPS’ independence is so important that in relation to core principles for effective deposit insurance system, the International Association of Deposit Insurers (IADI) even states: “The deposit insurer should be operationally independent, well-governed, transparent, accountable, and insulated from external intervention.”

“The principle states that the insurance corporation must be operated independently, have good governance, be transparent, accountable, and free from external intervention,” Justice Guntur said.

Moreover, Article 2 paragraph (3) of Law No. 24 of 2004 in Article 7 point 2 of the P2SK Law and its elucidation emphasizes that the LPS may not be intervened by any party including the Government except as explicitly stated in the Law.

“To increase the independence, transparency, and institutional credibility of the LPS, Law No. 4 of 2023 also mandates the establishment of the Deposit Insurance Corporation Supervisory Body (BS LPS) to assist the DPR in carrying out its supervisory function in certain areas of the LPS,” Justice Guntur added.

Also read:

Lecturers and Student Questions Political Intervention Against LPS 

Lecturers and Student Revise Legal Standing in Questioning Political Intervention Towards LPS

Govt Guarantees LPS’s Independence Despite Finance Minister’s Approval

Bank Indonesia Explains Short-Term Liquidity Loans vs LPS Funds

Petitioners’ Expert: Finance Minister Intervenes by Approving LPS’ Work Plan-Budget

President’s Expert: Finance Minister’s Approval of LPS’ RKAT Not Intervention 

Expert: Minister’s Approval of LPS’ RKAT Should Be Reinterpreted

Author         : Ahmad Sulthon Zainawi
Editor          : Nur R.
PR              : Fauzan F.
Translators  : Syifa Amelia/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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