Policy Guarantee Program Expanding Deposit Insurance Corporation Mandate under Financial Sector Regulatory Framework

Abstract

This article examines the expansion of Indonesia’s deposit insurance mandate through the introduction of the Policy Guarantee Program under the Financial Sector Development and Strengthening Law (2023). Unlike prior studies that predominantly describe regulatory changes, this research offers a novel analytical perspective by positioning the program as a form of institutional convergence between banking deposit insurance and insurance policyholder protection within a unified financial safety net framework. Using a normative juridical method with statutory and conceptual approaches, this study analyzes the legal rationale for extending the deposit insurance authority and evaluates its implications for institutional governance. The findings reveal that the program marks a significant shift from a sector-specific guarantee model toward an integrated financial protection mechanism. This transformation not only strengthens consumer protection for policyholders but also enhances systemic stability by mitigating the impact of insurance company insolvency. However, the study also identifies critical challenges, including institutional capacity constraints, the need for effective coordination with financial supervisory authorities, and the risk of moral hazard arising from guarantee schemes. The novelty of this research lies in conceptualizing the program as a hybrid regulatory instrument that bridges two traditionally separate domains, banking and insurance, while highlighting its implications for regulatory design in emerging financial systems. Accordingly, the study argues that the effectiveness of this policy depends on the development of comprehensive implementing regulations, clear governance structures, and robust oversight mechanisms to ensure both financial stability and policyholder protection.