AN ANALYSIS OF THE CAUSES OF RURAL BANK FAILURES: REGULATORY CHALLENGES OR GOVERNANCE ISSUES?

Ari Kurniawan, Trisadini Prasastinah Usanti, Indira Retno Aryatie, Sufy Anggriani

Abstract


A considerable number of rural banks (BPRs) in Indonesia have become failed banks, meaning they have been liquidated by the competent authorities. In one prominent case, even a commercial bank was identified as having systemic implications, prompting the government to intervene with bailout funds in order to safeguard national economic stability.The high incidence of banking failures reflects weaknesses in regulatory oversight, the absence of an integrated supervisory system, and the ineffective implementation of governance within BPRs. These deficiencies have hindered their ability to perform their core function as financial intermediaries. Furthermore, the lack of effective supervision suggests a stagnation in the improvement of BPR governance practices.As such, there is an urgent need for more comprehensive regulations, stricter and more consistent supervision, integrated systems, and the robust implementation of good governance practices. These measures are essential to ensure the soundness of BPRs and to strengthen the national financial services industry, particularly in the rural banking sector.This study aims to analyze the root causes behind BPRs failures by examining whether regulatory shortcomings or governance issues are the primary contributing factors that lead to financial distress and eventual failure. This legal research adopts a doctrinal method using both statutory and conceptual approaches. The findings are expected to contribute to the improvement of governance and regulatory frameworks within the rural banking system.

Keywords


Sekitar lima kata kunci dalam urutan abjad, dipisahkan dengan koma.

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DOI: https://doi.org/10.24815/sklj.v9i2.47912

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