Implementation of Bail-In in Facing Bank Indonesia's Liquidity Assistance Deficit (BLBI)

The banking crisis that occurred in 1997-1998 prompted the government to distribute Bank Indonesia Liquidity Assistance (BLBI) as a measure to stabilize the economy. BLBI has a legal basis that refers to Law Number 13 of 1968 concerning the Central Bank and Law Number 23 of 1999 concerning Banking. However, the implementation of BLBI cannot be separated from massive irregularities, as revealed in the 2000 BPK-RI Investigative Audit Report, which recorded the misuse of funds amounting to Rp144.536 trillion or 95.5% of the total funds disbursed. This study uses a normative approach by examining the regulations that are the basis for the implementation of BLBI and policy evaluations related to handling the banking crisis. The analysis also includes the application of the bail-in principle in the Law on the Prevention and Handling of Financial System Crises (PPKSK) in response to the problem of irregularities in the distribution of BLBI. The results of the study show that the implementation of BLBI has experienced many violations, both in terms of distribution and use of funds, due to weak supervision and accountability. As a solution, the bail-in approach is implemented through open bank bail-in mechanisms such as capital surcharge or debt-to-equity swap, as well as closed bank bail-in such as the transfer of bank assets and liabilities (Purchase and Assumption). This approach does not involve the State Budget, offers transparency, and strengthens the protection of the national financial system, as stipulated in Law Number 24 of 2004 concerning the Deposit Insurance Corporation.