The 2017 Financial Sector Assessment Program (FSAP) highlighted key areas for improvement in Indonesia’s financial sector, particularly regarding the clarity and strengthening of macroprudential policies. One of the core recommendations of the FSAP was to address the lack of a defined framework for cooperation between regulatory agencies, noting that the multiple objectives of the involved institutions could potentially lead to conflicting policies.
The FSAP emphasized that the absence of clear coordination among agencies and their separate control over prudential tools increased the risk of ineffective or counterproductive outcomes. This could ultimately lead to a situation where policies intended to safeguard the financial sector may blur accountability lines, raising concerns over the overall stability of the financial system.
The FSAP’s findings focused on the need for improved collaboration and alignment of objectives between agencies responsible for commercial banking, credit regulation, and systemic risk management. The assessment also called for more robust stress testing of financial institutions to better understand potential vulnerabilities in the sector, especially in light of evolving macroeconomic conditions.
In order to enhance financial sector stability, the FSAP underscored the importance of refining macroprudential policy instruments. Strengthening these policies, it argued, would help mitigate risks and safeguard the financial system from future shocks, ensuring sustainable growth and the resilience of Indonesia’s financial institutions.
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