PAPER

Indonesia Deposit Insurance Corporation (IDIC)

Arranged to fulfill the tasks of Banks and Other Financial Institutions course

Supporting lecturer: Ellen Theresia S, S.E., AK., M.B.A

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Arranged by:
Group 1

Rahmad Subandi 2020210464

Fania Rahmadina 2020210467

Andhika Fanny Wicaksono 2020210485

Zuhriyatil Kamilah 2020210489

S1 MANAGEMENT

UNIVERSTAS HAYAM WURUK PERBANAS SURABAYA

2021
 PREFACE

Praise be to God Almighty for the blessings of his grace, and that we were
given the opportunity to be able to complete a paper entitled “Indonesia Deposit
Insurance Corporation (IDIC)” on time. This paper is structured to fulfill the tasks
of Banks and Other Financial Institutions course.

We would like to thank those who helped us in every way, so that the
paper can be resolved. Hopefully this paper can give broader insight to the
readers.

We realize that this paper is far from perfect, therefore criticism and
suggestions from all stakeholders that are built for the perfection we always hoped
this paper.

Authors

October 20, 2021

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 TABLE OF CONTENTS

PREFACE ................................................................................................................ i
TABLE OF CONTENTS ........................................................................................ ii
CHAPTER I INTRODUCTIONS ........................................................................... 1
1.1 Background .............................................................................................. 1
1.2 Purposes.................................................................................................... 1
1.3 Advantages ............................................................................................... 2
CHAPTER II DISCUSSION .................................................................................. 3
2.1 The Meaning of IDIC ............................................................................... 3
2.2 The History of IDIC ................................................................................. 3
2.3 The Form and Legal Foundation of IDIC ................................................ 5
2.4 The Vision and Mission of IDIC .............................................................. 5
2.5 The Purposes and Functions of IDIC ....................................................... 6
2.6 The Authorities and Duties of IDIC ......................................................... 7
2.7 The Values of IDIC .................................................................................. 7
2.8 The Membership of IDIC ......................................................................... 8
2.9 The Financial Sources of IDIC ................................................................. 8
2.10 The Relation of IDIC with Other Institutions .......................................... 9
CHAPTER III CONCLUSION ............................................................................. 10
3.1 Conclusion .............................................................................................. 10
REFERENCES....................................................................................................... iii

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 CHAPTER I

INTRODUCTIONS

1.1 Background
Since its operation on September 22, 2005, IDIC has performed its core
functions and duties of performing liquidation of several banks, paying guarantee
claims, and conducting rescue of one general bank.

Over the course of more than 11 years, IDIC has also undergone changes
including changes seen in the significantly increasing number of employees and the
growing organizational structure. Likewise with the organizational structure it has
undergone 5 times the important changes, from originally consisting of only 15
Groups, it has now grown to 24 Groups.

Many studies have tried to explain the cause of Indonesia's economic crisis
and cost a lot of money, especially in the banking sector. The banking crisis in
Indonesia according to the view of economic analysis, in addition to the
vulnerability of the banking system in Indonesia, marked by a lack of capital, poor
management of good governance, and institutional laxity, weak regulation and
supervision amid the rapid increase in growth in the economy. Those changes are
made to meet needs as more and more tasks must be undertaken by IDIC.

That is what encourages our Curiosity to examine more deeply about this
IDIC and as critically demanded economics students especially in this area of study.
So, this paper will specifically discuss the Deposit Insurance Institution as issued
by Law No. 10 of 1998 on Banking mandates the establishment of IDIC as an
implementer of guaranteeing community funds. It is hoped that the institution will
regrow public confidence in the banking industry

1.2 Purposes
1. To knowing the meaning of Indonesia Deposit Insurance Corporation (IDIC)

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 2. To knowing the characteristic of IDIC
3. To knowing the purposes of IDIC
4. To knowing the functions of IDIC
5. To knowing the authorities of IDIC
6. To knowing the duties of IDIC
7. To knowing the values of IDIC
8. To knowing the membership of IDIC

1.3 Advantages
1. The readers know the meaning of Indonesia Deposit Insurance Corporation
2. The readers know the characteristic of IDIC
3. The readers know the purposes of IDIC
4. The readers know the functions of IDIC
5. The readers know the authorities of IDIC
6. The readers know the duties of IDIC
7. The readers know the values of IDIC
8. The readers know the membership of IDIC

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 CHAPTER II

DISCUSSION

2.1 The Meaning of IDIC

Indonesia Deposit Insurance Corporation (IDIC) is an independent
institution that serves to guarantee the deposits of banking customers in Indonesia.
This body was established based on the Law of the Republic of Indonesia Number
24 concerning Indonesia Deposit Insurance Corporation established on September
22, 2004. This law came into effect 12 months since it was enacted so that the
establishment and operation of IDIC began on September 22, 2005. Every bank that
conducts business activities in the territory of the Republic of Indonesia must be a
participant in IDIC.
The legal aspect of the Indonesia Deposit Insurance Corporation (IDIC) is
a necessity as a support for an effective bank supervision system and is an institution
that is expected to guarantee refunds held at banks. It should be thought about first
in the formation of IDIC is the availability of legal tools that can be used as a legal
basis and provisions that govern the procedures for the implementation of
guarantees by IDIC, sanctions and procedures for supervision of IDIC.

2.2 The History of IDIC

In Indonesia, discourse about the need for underwriting schemes began to
emerge when the bankruptcy of Sumba Bank in November 1992, after the precedent
began to arise the realization that depositors must get adequate protection, when
there is mismatch and insolvency caused by bank mismanagement.

The banking industry is one of the most important components in the

national economy in order to maintain the balance of progress and national
economic unity. The stability of the banking industry greatly affects the stability of
the overall economy.

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 In 1998, the monetary and banking crisis that hit Indonesia, which was
marked by the liquidation of 16 banks, resulted in a decrease in the level of public
confidence in the banking system. To overcome the crisis that occurred, the
government issued several policies including providing guarantees on all bank
payment obligations, including community deposits (blanket guarantee). This is
stipulated in Presidential Decree No. 26 of 1998 on Guarantees Against
Commercial Bank Payment Obligations and Presidential Decree No. 193 of 1998
on Guarantees Against People's Credit Bank Payment Obligations.

In its implementation, blanket guarantee can indeed regrow public trust in

the banking industry, but the scope of guarantees that are too broad causes the
emergence of moral hazard both from the side of bank managers and the
community.

To overcome this and in order to still create a sense of security for

depository customers and maintain the stability of the banking system, the
guarantee program that is very broad in scope needs to be replaced with a limited
guarantee system. The issuance of Law No. 10 of 1998 on Banking mandates the
establishment of an Indonesia Deposit Insurance Corporation (IDIC) as the
implementer of public fund guarantees.

On September 22, 2004, the President of the Republic of Indonesia passed

the Law of the Republic of Indonesia Number 24 concerning Indonesia Deposit
Insurance Corporation. Under the Act, IDIC, an independent institution that serves
to guarantee the deposits of depository customers and participates actively in
maintaining the stability of the banking system in accordance with its authority, was
formed.

This law is effective from September 22, 2005, and from that date the IDIC
is officially operational.

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2.3 The Form and Legal Foundation of IDIC
a) Law No 10 of 1998 on banking mandates the establishment of IDIC
b) IDIC was established by the Government of Indonesia through Law No. 24 of
2004 on the Institution of Deposit Insurance.
c) IDIC is a legal entity under Act No. 24 of 2004 concerning the Deposit
Insurance Institution.
d) IDIC is an independent, transparent and accountable institution in carrying out
its duties and authorities.
e) IDIC is responsible to the President.
f) IDIC is located in Jakarta and can have a representative office in the country
area of the Republic of Indonesia.

2.4 The Vision and Mission of IDIC

A. Vision
To become a leading, trusted, and recognized institution at the national and
international levels in guaranteeing customer deposits and implementing bank
resolutions to encourage and maintain financial system stability.

B. Missions
The missions of IDIC are:
a) Organizing effective deposit insurance in order to protect customers;

b) Implement effective and efficient bank resolutions;

c) Implement crisis management through effective and efficient bank
restructuring; and
d) Take an active role in encouraging and maintaining the stability of the
national financial system

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2.5 The Purposes and Functions of IDIC
A. Purposes
The purposes of IDIC are to guarantee bank customer deposits and actively
participates in maintaining the stability of the banking system in accordance
with its authority.

B. Functions

IDIC serves to guarantee the deposits of bank customers and participate

actively in maintaining the stability of the banking system in accordance with its
authority. From March 22, 2007 onwards, the maximum IDIC guaranteed deposit
value of Rp 100 million per customer per bank, which includes principal and
interest / profit sharing that has become the customer's right. If the bank customer
has deposits of more than Rp 100 million then the remaining deposits will be paid
from the bank's liquidation proceeds.

The purpose of the IDIC guarantee public policy is to protect small customer
deposits because based on deposit distribution data as of Dec. 31 2006, accounts
equal to or less than Rp 100 million cover more than 98% of deposit accounts.

Since the global crisis in 2008, the Government then issued Regulation No.
3 of 2008 on Changes to Law No. 24 of 2004 concerning Deposit Guarantee
Institutions that change the value of deposits guaranteed by IDIC to
Rp2,000,000,000 (two billion rupiah). This Government Regulation In lieu of Law
can be readjusted, when the global crisis expands or subsides.

Functions based on Law No. 24 of 2004 on IDIC are in Chapter III article 4
as follows:

1. To insure customer’s deposits

The guarantee of depository customers includes also lending a form
equivalent to deposits for banks that use the principle of sharia.
2. To play an active role in maintaining banking system stability in accordance
with its authority

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 IDIC serves to create and maintain financial system stability together with
the Minister of Finance, Bank Indonesia, and LPP, in accordance with their
respective roles and duties.

2.6 The Authorities and Duties of IDIC

A. Authorities
IDIC has several authorities, there are:
a) Determine, collect insurance premiums.
b) Determine, collect participant contributions.
c) Manage IDIC assets and liabilities.
d) Obtain customer data, health, inspection reports.
e) Reconciliation, verification, confirmation of data.
f) Define the terms, methods, conditions of the claim.
g) Appoint, authorize, assign other parties for the benefit of IDIC.

B. Duties
The duties of IDIC are:
a) Formulate and stipulate policies for the implementation of deposit
insurance.
b) Implement deposit insurance.
c) Formulate and establish policies to play an active role in maintaining the
stability of the banking system.
d) Formulate, determine and implement bank resolution policies that do not
have a systemic impact.
e) Implement the handling of failed banks that have a systemic impact.

2.7 The Values of IDIC

IDIC has several values, there are:

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 a) Integrity, namely speaking the truth, acting independently in accordance with
the code of ethics, and always prioritizing the interests of the institution
b) Collaboration, namely promoting cooperation and mutual support with an open
attitude and good prejudice, mutual trust and respect to achieve the goals of the
institution
c) Accountable, namely daring to be responsible for all actions or decisions taken,
in accordance with applicable policies/regulations, taking into account risks
d) Respect is respecting, respecting, and caring for others based on empathy,
courtesy and sincerity without any strings attached
e) Excellence is striving for the best results by setting high standards, conducting
continuous development and Innovation.

2.8 The Membership of IDIC

a) Chairman of the board of commissioners
b) Member of the board of commissioners and chief executive
c) Member of the board of commissioners
d) Ex-officio member of financial services authority
e) Ex-officio member of Bank Indonesia
f) Ex-officio member of the Ministry of Finance

2.9 The Financial Sources of IDIC

There are four sources of IDIC funding, there are from:
a) The initial capital of IDIC is set forth for the amount of Rp 4 trillion which is
a separately allocated state asset
b) Membership contribution which is paid at the first time a bank becomes IDIC
deposit insurance’s member
c) Insurance premiums which are paid each semester
d) Earnings from insurance reserve investment.

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2.10 The Relation of IDIC with Other Institutions
IDIC can cooperate with domestic and foreign organizations or institutions
in carrying out their duties. IDIC can also act as a member of an international
organization or institutions representing the Republic of Indonesia.

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 CHAPTER III

CONCLUSION

3.1 Conclusion
IDIC is an independent institution established under Act No. 24 of 2004 on
IDIC as amended by Act No. 7 of 2009. Indonesia Deposit Insurance Corporation
(IDIC) is an independent institution that functions to guarantee deposits of banking
customers in Indonesia.

IDIC is a legal entity and is responsible to the President of the Republic of

Indonesia.

The types of deposits guaranteed by IDIC are the forms of depositors'

deposits that include giro, deposits, certificates deposits, savings, and other forms
of equalization.

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 REFERENCES

www.lps.go.id

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