OJK Says Universal Banking Implementation Depends on Bank Readiness
Jakarta (ANTARA) - The Financial Services Authority (OJK) has stated that the implementation of the universal banking concept will be tailored to each bank’s readiness, given the diverse conditions and capacities of banks in Indonesia.
Dian Ediana Rae, Chief Executive of Banking Supervision at OJK, said the implementation of universal banking will not be carried out uniformly, as each bank must meet a number of requirements before it can operate under this business model.
“To carry out universal banking activities, OJK considers the internal readiness of each bank, because the conditions and capacities of banks in Indonesia remain varied, so the implementation of universal banking activities cannot be done uniformly,” Dian said in a statement in Jakarta on Thursday.
He explained that, in general, there are three main aspects that banks must fulfil in order to implement universal banking: human resources, technology, and governance.
In terms of human resources, banks need experts who are not only proficient in conventional banking but also competent in investment, insurance, and other financial services.
On the technology side, a bank’s digital infrastructure must be able to integrate various service lines within a reliable and secure system.
“This includes the ability to manage customer data in an integrated manner, system resilience against disruptions, and protection against increasingly complex cyber risks as services expand,” Dian said.
Meanwhile, on governance, banks must have a strong internal oversight structure, including separation of functions between business lines, integrated risk control mechanisms, transparency in reporting to the regulator, and adequate risk management and compliance capacity.
Furthermore, Dian said the more diverse the services operated within a single institution, the more important it becomes to ensure that risks do not spill over into other lines.
To mitigate such risks, exposure limits and capital allocation per service line are required. The commercial banking division and the division for capital market activities should ideally have their own risk limits, with capital reserves allocated separately.
“This means that if the investment division suffers losses, the impact does not directly touch the capital that protects depositors. Each line has its own structural fence,” he explained.
In addition, OJK also highlighted the importance of implementing a Chinese wall, or restrictions on the flow of information between business units, to prevent conflicts of interest.
Dian cited, for example, the relationship between an investment banking division holding material non-public information and a wealth management or brokerage division serving retail investors.
Dian also stressed the need for periodic scenario simulations, or stress tests.
“This serves as an early warning system, where vulnerabilities are identified and addressed before they become real problems, not after a crisis has occurred,” he said.
Universal banking is a banking concept that allows a single bank to provide a variety of financial services in an integrated manner within one institution.
Beyond raising funds and extending credit, banks may also carry out various other financial service activities with OJK’s approval, thereby functioning as a one-stop financial services provider for customers.