The Dilemma of Independent Regulation
Early in 2026, Indonesia’s financial markets experienced significant turbulence following concerns raised by MSCI, a global index provider, regarding market accessibility, trading practices, and transparency. These developments placed increased scrutiny on Indonesia’s financial regulatory framework, particularly the role of the Otoritas Jasa Keuangan (OJK) and the Indonesia Stock Exchange (BEI). This has prompted broader discussion on regulatory effectiveness, including renewed attention to OJK’s institutional structure and funding model.
Understanding OJK
The Otoritas Jasa Keuangan is an independent state institution responsible for the regulation and supervision of Indonesia’s financial services sector. Established under Law No. 21 of 2011 and becoming fully operational in 2013, OJK was created to consolidate oversight previously divided among institutions, including Bank Indonesia and the former capital market authority, Bapepam-LK. The objective was to establish an integrated supervisory framework capable of supporting financial system stability, improving governance, and strengthening market confidence.
OJK’s responsibilities are broad and span both prudential and market conduct supervision. Its oversight includes banking, capital markets, and non-bank financial institutions, as well as areas such as financial innovation, digital assets, and consumer protection. In practice, it oversees licensing, regulatory formulation, supervision, enforcement, and dispute resolution. Its role is central to ensuring orderly market functioning, fair business practices, and the protection of financial consumers.
Where Independence Gets Complicated
Since its establishment, OJK’s operations have been primarily funded through levies collected from the financial services industry it supervises. Based on Chapter XI (Articles 34–37) of Law No. 21 of 2011, this model was designed to support OJK’s independence by reducing reliance on direct government budget allocations.
In its early years, OJK still relied partially on government funding. Over time, however, the levy-based system has become the dominant source of funding. As of recent years, OJK’s annual budget, estimated in the range of IDR 10–12 trillion, has been substantially supported by industry levies.
For many years, this structure has been considered effective in maintaining operational autonomy. However, periods of market turbulence often lead to renewed scrutiny of institutional arrangements. In this context, questions have emerged regarding whether an industry-funded model could, both in perception and in practice, influence the regulator’s posture toward enforcement.
At the policy level, discussions have begun to consider alternative funding approaches, including the possibility of reducing reliance on levies and increasing the role of state-linked funding sources. Such proposals are generally framed as efforts to strengthen independence from regulated entities. At the same time, they introduce a different set of considerations, particularly regarding potential exposure to fiscal and political dynamics.
Government-based funding may reduce perceived conflicts of interest and could support stronger enforcement and alignment with international standards. However, it may also create sensitivities related to budget allocation, institutional flexibility, and long-term governance independence. In contrast, maintaining an industry-funded model without enhancement may leave concerns around accountability and perception unaddressed.
Global Contexts on Regulator Independence
There is no golden standard for funding financial regulators. Each institutional model carries its own advantages and trade-offs, it becomes a matter of what best fits each jurisdiction.
In practice, most jurisdictions operate along a spectrum between government and industry funding. For example, the UK’s Financial Conduct Authority (FCA) and Australia’s Australian Prudential Regulation Authority (APRA) are primarily funded through industry levies. In contrast, the U.S. Securities and Exchange Commission (SEC) operates within a framework of congressional appropriations, while the Monetary Authority of Singapore (MAS) integrates regulatory functions within the central banking system.
The UK and Australia adopt a “user-pays” principle, under which the regulated industry contributes to the cost of supervision. The U.S., by contrast, reflects a governance approach that emphasizes oversight through elected institutions. Each model reflects different trade-offs: industry funding may raise questions of proximity to regulated entities, while government funding may introduce exposure to political or fiscal considerations. In practice, most systems operate as a hybrid of both.
Beyond the Debate
For Indonesia, the path forward is not simply a choice between one funding model and another, but how to ensure that OJK’s independence remains credible under evolving market conditions. A shift toward government-based funding may address certain concerns related to industry influence, but it may also introduce new dependencies.
In this context, a more measured approach may lie in maintaining a refined version of the current structure by strengthening governance within the existing framework, enhancing transparency in funding, reinforcing accountability mechanisms, and ensuring consistency in regulatory enforcement. Ultimately, the effectiveness of a financial regulator is determined not solely by how it is funded, but by the integrity, discipline, and credibility with which it exercises its mandate. (Jeremy)