A Legal Framework of Foreign Banking in the Indonesian Banking System

Abstract

The legal work involved in systemic bank restructuring is an essential element of the government's microeconomic efforts. The existence of foreign banks in Indonesia is developing related to business and investment needs, where Indonesia is very need foreign capital but the presence of foreign banks in Indonesia from a legal perspective continues to experience problems, such as regarding the term of foreign banks. The research was conducted using a normative-legal research method. The research site was conducted at Bank Indonesia, the Office of the Financial Services Authority, the Office of the Deposit Insurance Corporation, the Indonesian Ministry of Foreign Affairs. The results show that the legal status of foreign banks in terms of two aspects, namely legal personality and legal capacity. Personality legal of foreign banks in Indonesia are branches or representatives of banks domiciled abroad, have license to operate in Indonesia according to applicable regulations in Indonesia, have rights, obligations and responsibilities that must be conducted according to the law in Indonesia. Legal capacity of foreign banks in Indonesia is a form of foreign bank legal entity following the form of its head office legal entity abroad. Supervision of foreign banks is conducted through coordination and cooperation between the host supervisory authority and home country as the main requirement for the effective supervision and operation of foreign banks and settlement of disputes can be made based on an agreement between the two parties to settle it with an international arbitration body, namely if the dispute resolution process is the court’s authority in the country concerned.

Keywords: Bank; Foreign Banks; Investment; Legal Framework

DOI: 10.7176/JLPG/85-23

Publication date:May 31^st 2019