The Indonesian Financial Services Authority recently issued a regulation which relaxes bank ownership rules under its single presence policy but simultaneously increases minimum capital requirements. The regulation was conceived prior to the COVID-19 crisis and the issuance of emergency economic legislation. Consequently, the big question is whether the regulation will continue to be relevant, given the perfect storm facing the national economy and the Indonesian financial services industry.
Bank Indonesia (the Indonesian central bank) has issued a regulation and accompanying circular letter governing the mandatory use of rupiah for all cash and non-cash transactions. In prescribing the mandatory use of rupiah – with certain exemptions and special considerations – the regulation and circular letter apply the territoriality principle that underlies many of Bank Indonesia's other regulations.
As part of its efforts to maintain the stability of the rupiah and to ensure an adequate US dollar supply in the domestic market, Bank Indonesia has issued a regulation regarding commercial banks' dollar repo transactions. The regulation opens a window for commercial banks in Indonesia to perform such transactions with Bank Indonesia.
In keeping with its statutory duty to stabilize Indonesia's currency, the Bank of Indonesia has taken measures to control speculative rupiah transactions, capping purchases of foreign currency from a bank at $100,000 a month. An individual or legal entity, whether foreign or Indonesian, must demonstrate the economic necessity of a transaction that exceeds the threshold.
Given the economic dislocation caused by the spread of COVID-19, many parties facing difficulties in performing contracts will be considering their legal situation. Can they be held liable for damages for a breach of contract or losses suffered by third parties due to circumstances beyond their control or does the law provide a relief mechanism for dire circumstances such as these? Although Indonesian law provides a relief mechanism, it is a difficult one of which to avail.
With the world facing its biggest challenge of the century so far, and probably its greatest challenge since World War II, businesses are asking how they should best respond to the impact of the COVID-19 crisis. This article answers the FAQs that businesses are asking with regard to contracts, force majeure and shareholders' duties.