The financial laws of Indonesia are about to undergo a significant revision. This is how it might appear.

After two years of unsuccessful attempts and market resistance, Indonesia is poised to implement significant changes to its banking sector regulation as early as this week.

The proposed bill aims to strengthen the central bank's authority to support Southeast Asia's biggest economy during times of crisis by extending its mandate and formalizing its right to do so. The central bank would have purchased debt papers worth 1,144 trillion rupiah (about $73 billion) by the end of 2022. Additionally, the law aims to update legislation to reflect how quickly financial technology and cryptocurrencies are developing.

Following the finance commission's approval of the motion on December 8, Parliament is anticipated to vote on the proposal this week. What you need to know about the financial sector reform is as follows:

Indonesia is changing its financial regulations for what reason?

Regulations now in place are convoluted, frequently overlapping, if not conflicting. Given the recent fintech growth and the central bank's aspirations for a digital rupiah, they are also out of date.

In order to finance the needs of the economy, the administration anticipates that the modifications will deepen the local capital markets.

It also fits in with President Joko Widodo's plan to simplify rules and remove red tape in order to make it easier for financial authorities to respond quickly to emergencies.

What modifications are coming to the central bank?

If approved, the bill will allow Bank Indonesia to support the government by purchasing bonds when the president declares a crisis, formalizing what the central bank and the finance ministry had called a "one-off" move during the pandemic.

The plan calls for the central bank to, in addition to its current responsibilities for rupiah and price stability, "participate in preserving financial system stability in order to foster sustainable economic growth" and preserve payment system stability.

The most recent draft removed an earlier attempt to expressly incorporate job creation and economic growth in Bank Indonesia's mandate, which analysts claimed would jeopardize the institution's independence.