The History of IDIC
Banking industry is one of the most vital components in the national economy in order to maintain balanced progress and unity of the national economy. Banking industry stability significantly affects the overall economic stability.
In 1998, the monetary and banking crisis hitting Indonesia, which was marked by the liquidation of 16 banks, resulted in the declining public trust in banking system. To handle the crisis, the government issued some policies, among others was providing blanket guarantee for all bank payment obligations, including customer’s deposits. It is stipulated in Presidential Decree Number 26 of 1998 on Guarantee for Payment Obligations of Commercial Banks and Presidential Decree Number 193 of 1998 on Guarantee for Payment Obligations of Rural Banks.
In its implementation, blanket guarantee successfully regained public trust in banking industry; however, the enormous scope of the insurance resulted in moral hazards by the bank management and the public.
To resolve such situation, to build a sense of safety for customers, and to maintain banking system stability, the enormous insurance program must be replaced with limited coverage deposit insurance.
Law Number 10 of 1998 on Banking mandates the establishment of Indonesia Deposit Insurance Corporation (IDIC) as the executor of public fund insurances.
On 22 September 2004, the President of the Republic of Indonesia signed Law Number 24 on Indonesia Deposit Insurance Corporation. Under the Law, IDIC is established as an independent institution functioning to insure customer’s deposits and play an active role in maintaining banking system stability in accordance with its authority.
This law is effective since 22 September 2005 and IDIC has been officially operating since then.