Indonesia's financial regulations are slated for a significant revision. Here's how it may appear

After two years of failed attempts and market resistance, Indonesia is poised to approve substantial reforms to its financial sector legislation as early as this week.

The new bill aims to broaden the central bank's mandate and bolster its authority to purchase government assets in times of crisis, as it has done for the past three years to bolster Southeast Asia's largest economy. By the end of 2022, the central bank will have purchased 1.144 quadrillion rupiah ($73 billion) in debt instruments. In addition, the measure tries to align legislation with the fast growing fields of financial technology and cryptocurrency.

The plan is scheduled to be put to a vote this week, after the finance panel approved it on December 8. Here's what you should know about the reform of the banking sector:

Why is Indonesia revising its financial legislation?

Existing regulations are convoluted and frequently inconsistent or overlapping. Given the current development in fintech and the central bank's aspirations for a digital rupiah, they are also obsolete.

The government anticipates that the measures will assist strengthen the local capital markets in order to finance the needs of the economy.

It is also consistent with President Joko Widodo's goal of changing legislation to reduce bureaucracy and simplify procedures, particularly so that financial authorities can respond to crises more quickly.

What alterations are ahead for the central bank?

If passed, the bill will give Bank Indonesia the ability to purchase government bonds when the president declares a crisis, legitimizing its unusual action during the pandemic, which the central bank and the finance ministry had previously described as a "one-time" measure.

As part of the plan, MPs want the central bank to "participate in maintaining financial system stability in order to foster sustainable economic growth" in addition to its current mandates of ensuring rupiah and price stability.

An earlier effort to expressly incorporate job creation and economic growth in Bank Indonesia's mandate, which analysts say poses a threat to the institution's independence, has been removed from the most recent measure.

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