The ideal concept of foreign banking in the banking system in Indonesia: Challenges and Expectations

Abstract

Financial sector restructuring has been adopted in many countries to improve the stability of financial system. The approach of restructuring may be different for each country due to the country specific condition; such as macro-economic fundamental, corporate sector structure, political climate, culture, and accounting system. The research was conducted using a normative-legal research method with using statute and case approaches. The results show that the ideal legal construction for foreign banks in the framework of realizing the national development goals is through the establishment of a law that regulates foreign banks comprehensively with clarity of terms and operational oversight of foreign banks. Hence, a foreign bank legal entity should be a limited liability company and established according to Indonesian law so that supervision can be carried out in its position as a subsidiary in the context of investment in Indonesia.

Keywords: Bank; Banking System; Domestic Banks; Foreign Banks

DOI: 10.7176/EJBM/11-19-07

Publication date:July 31^st 2019