BNBFI

Financial instability is a risk in today’s financial system. The instability exists as a result of the VUCA’s state. VUCA is a state of vulnerability that is uncertain, complex, and ambiguous, affecting the financial system’s resilience.

To address these circumstances, some central banks devote significant resources to developing an integrated policy known as macroprudential policy, which is focused on achieving and maintaining financial stability.

Additionally, the Bank for International Settlements (BIS) organizes frequent workshops and seminars to discuss how macroprudential tools are set and applied in the face of numerous external shocks and internal vulnerability.

In Indonesia, Bank Indonesia has been mandated as a macroprudential authority since 2014, with the responsibility of regulating and supervising the upcoming probability of a systemic event. Additionally, to bolster its mandate, the Ministry of Finance established the financial system stability forum as a consultative forum comprised of the Ministry of Finance, Bank Indonesia, the Financial Services Authority, and the Indonesia Deposit Insurance Corporation, with the Ministry of Finance serving as the convener. In turn, the respective institution is jointly responsible for preventing and mitigating financial system instability.

Given the critical nature of financial system stability, the role of banks and non-bank financial institutions is inescapably critical. Banks are classified as the dominant financial institution, both Islamic and conventional. The size, complexity, and interconnectedness of banks may all contribute to the financial system’s procyclical behavior. Credit expansion and balance sheet mismatches may be contributing to the financial shocks emanating from the banking sector. The role of Islamic banks is discussed in detail. Its principles and operational aspects, which are based on Islamic values, are believed to contribute to a more stable financial system than the current one.

According to some empirical studies, Islamic banks are more resilient to the financial system because they do not create bubbles or excessive mismatches in their balance sheets. Additionally, the non-bank financial institutions’ role is critical. They contribute significantly to the formation of a financial system due to their role as financial intermediaries and proximity to the real sector. Insurance, pawnshops, capital markets, and microfinance institutions all play a critical role in shaping the financial system’s landscape.

Finally, understanding financial institutions, both bank and non-bank, can be divorced from the concept of corporate social responsibility as a component of social services. According to Islamic sources, social responsibility can be expressed through zakah and waqf.

Thus, this course is designed to provide students with a general understanding of the theories and practices of bank and non-bank financial institutions in the context of achieving and maintaining financial system stability in Indonesia, whether from a conventional or Islamic perspective.

Students are expected to complete the following tasks at the conclusion of the course :

1. To gain a thorough understanding and analysis of the regulatory authority’s role in achieving and sustaining financial system stability.
2. To comprehend and analyze the role of banking financial institutions, whether Islamic or conventional, in ensuring the stability of the financial system.
3. To comprehend and analyze the role of non-bank financial institutions, whether Islamic or conventional, in ensuring the stability of the financial system.
4. To comprehend and analyze the role of social institutions in ensuring the stability of the financial system.

As a result, this course is divided into four modules :

1. The Ministry of Finance, Bank Indonesia, the Financial Services Authority, and the Indonesia Deposit Insurance Corporation are all regulated institutions.
2. Bank Financial Institutions is a broad term that encompasses both Islamic and conventional banks.
3. Non-Bank Financial Institutions include insurance, pawnshops, capital markets, and Islamic or conventional microfinance institutions.
4. The term “Social Institutions” refers to zakah and waqf.

The learning activities take the form of lecture, field task, presentation, and discussion during the class meeting. Assessment will be based on the Learning Evaluation test for each module (60 percent), the module quizzes (20 percent), and the final presentation (20 percent) (20 percent ).

The Grading Systems are as follows:
A = 81 – 100
B = 71 – 80
C = 61 – 69
D = 51 – 59