Loss Allocation Powers of the Deposit Insurance Agency in Bank Restructuring: PP 11/2026

Government Regulation No. 11 of 2026 governs how the Deposit Insurance Agency (Lembaga Penjamin Simpanan, LPS) places funds in banks and exercises its powers when the Banking Restructuring Programme is running. Its official title is Peraturan Pemerintah Republik Indonesia Nomor 11 Tahun 2026 tentang Penempatan Dana pada Bank dan Pelaksanaan Kewenangan dalam Penyelenggaraan Program Restrukturisasi Perbankan oleh Lembaga Penjamin Simpanan (Government Regulation No. 11 of 2026 on the Placement of Funds in Banks and the Exercise of Powers in the Conduct of the Banking Restructuring Programme by the Deposit Insurance Agency). The text runs to more than 200 articles and sets out the mechanics of a programme that is activated only when banking problems threaten the national economy.

Issue

The Banking Restructuring Programme, abbreviated PRP in the regulation, is the standing legal channel for handling banking distress that endangers the wider economy. Pasal 1 supplies the definitions the rest of the text depends on: Bank Peserta PRP for a bank designated into the programme, Bank Sistemik for a bank whose size, capital, liabilities, network, transaction complexity, or interconnection with other financial sectors means its failure could bring down other banks or the financial services sector, and Krisis Sistem Keuangan for a financial system that has stopped performing its functions effectively. It also defines two resolution vehicles: the Bank Penerima, which receives transferred assets or liabilities, and the Bank Perantara, a bridge bank established by the Agency to hold transferred business before ownership passes to another party. The definitions place the Financial Services Authority, Bank Indonesia, and the Financial System Stability Committee alongside the Agency in the same framework.

Key Provisions

Pasal 68 gives the Agency authority to calculate and determine the losses suffered by a bank in the programme and to charge those losses against the bank's capital. Paragraph (2) sets the order in which any remaining loss is absorbed: first against subordinated liability instruments carrying a write-down or conversion feature, then against what remains of liabilities held by controlling shareholders and affiliated parties, through conversion into paid-up capital. Paragraph (3) turns on the resulting capital position. Where capital remains positive, shareholders keep their ownership rights; where it is negative, the Agency cancels the shareholdings by recalling the shares without compensation. Pasal 69 requires the Agency to issue a decision recording the loss determination and its allocation, stating at minimum the amount of loss, the amount absorbed into capital, the new value of the shares, and the ownership status of shareholders. That decision may be issued collectively, is delivered to shareholders, and is announced publicly; for a listed bank, written notice also goes to the stock exchange and the Financial Services Authority. Pasal 70 exempts the exercise of these powers from provisions of company, banking, and capital market legislation, naming shareholder meeting approval, creditor objection, share buy-back in corporate actions, and merger, acquisition, and consolidation rules. Pasal 71 charges losses back to directors, commissioners, or shareholders where the loss resulted from their fault or negligence. Pasal 24 allows the Agency to order shareholders to replace directors or commissioners who obstruct its examination of how placed funds were used, breach restrictions attached to the placement, fail to make sufficient effort to carry out ordered remediation, or are identified as committing acts that could harm a systemic bank.

Implications

The sequence in Pasal 68 places subordinated creditors and connected parties ahead of any public support in bearing losses, and Pasal 70 removes the corporate law steps that would otherwise slow that sequence, including the shareholder meeting approval that a bank would normally need for actions of this kind. Banks issuing subordinated instruments therefore need contractual write-down or conversion features for those instruments to sit in the first tier of Pasal 68 paragraph (2), a documentation point that runs alongside the product rules for sharia banking investment products. Listed banks face a disclosure step at the moment of loss allocation under Pasal 69 paragraph (6), which sits with the market conduct obligations applying to underwriters and broker-dealers. The personal liability route in Pasal 71 keeps directors, commissioners, and shareholders exposed where fault or negligence caused the loss.

Regulatory Context

The regulation implements the framework established by legislation on deposit insurance and on the prevention and handling of financial system crises, under which the Financial System Stability Committee determines when programme conditions exist. PP 11/2026 supplies the operational detail: who computes losses, in what order they are absorbed, what the resulting decision must contain, and which ordinary corporate procedures are set aside while the programme runs.

Read the full regulation in the CRPG Law Database.

Methodology: This memo summarises the official regulation text and is not legal advice; report corrections to contact@crpg.info.

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