Journal of Central Banking Law and Institutions

Substantive Shariah Compliance: Reassessing Malaysia’s Regulatory Framework for Islamic Banking Product Development

Mohamad Syafiqe bin Abdul Rahim — Wed, 23 Sep 2026 00:00:00 +0000

Islamic banking institutions are expected to continually innovate new products to remain competitive while ensuring compliance with Shariah principles. In Malaysia, this process is governed by a legal and regulatory framework under Bank Negara Malaysia. This study aims to analyse the framework governing Islamic banking product development to assess whether it effectively facilitates product development while ensuring substantive Shariah compliance, aligning products with its maqasid `aqd (contract objectives), which ultimately realises the maqasid shariah (Shariah objectives). Adopting a qualitative doctrinal legal methodology, the study analyses primary legislation and regulatory policies and draws on literature identified through library research. The study finds that Malaysia’s framework offers legal certainty, centralised Shariah governance and clear operational guidance for product development. However, the article concludes that the existing framework is comprehensive in ensuring procedural or formal compliance but less clearly oriented towards evaluating whether products achieve the broader objectives of Shariah in substance.

Repurchase Agreement Under Indonesian Law: Preserving Title Transfer Structure and Rethinking Margin Transfer

Iwan Chandra, Wagiman, Jeremy Fritz Asido — Wed, 23 Sep 2026 00:00:00 +0000

Repurchase agreements play an important role in modern financial markets by providing shortterm liquidity through the transfer of securities coupled with an obligation to repurchase equivalent securities at a later date. In Indonesia, however, legal uncertainty remains in two closely connected respects. First, a repurchase agreement may be recharacterised as a collateralised loan rather than a true sale and repurchase transaction, with significant consequences for the legal status of the securities, the parties’ rights, and enforcement. Second, margin transfers in repurchase agreements raise a distinct doctrinal question under Indonesian law, particularly regarding how such transfers can be accommodated without undermining the transaction’s title-transfer structure. This study employs normative legal research, drawing on statutory, conceptual, and comparative approaches. It examines the Indonesian regulatory framework governing repurchase agreements, relevant principles of Indonesian private law on transfer of rights and security interests, and comparative developments in financial collateral law. This article argues that the risk of recharacterisation may be reduced through clearer contractual drafting, conceptual consistency, and appropriate dispute resolution mechanisms. It further argues that although classical pledges may appear to offer a familiar analogy for margin transfers, relying on pledges as the legal basis for repurchase agreement margining risks blurring the distinction between repurchase agreements and collateralised loans and may therefore increase recharacterisation risk. The preferable approach is to preserve the titletransfer logic of repurchase agreement documentation by relying, in the short term, on selland-buyback mechanisms available within the repurchase agreement framework, while, in the longer term, Indonesia would benefit from a regulatory framework dedicated to financial collateral.

ATM Accessibility and Artificial Intelligence in Indonesian Banks Toward Financial Inclusion for All Modes of Disability

Wed, 23 Sep 2026 00:00:00 +0000

For persons with disabilities, access to ATMs in Indonesia remains far from friendly both physically and technologically, keeping essential financial services out of reach for many. In addition, the use of accessibility technology and Artificial Intelligence (AI) in the banking sector is far from optimal and unable to adequately provide financial inclusion for persons with disabilities. Bank Indonesia plays a leading role in promoting financial inclusion through its policies and regulations. The purpose of this study is to analyse the urgency of implementing accessibility technology for ATMs to support financial inclusion for persons with disabilities in Indonesia, and to explore the role of policy in encouraging its implementation. The research method is qualitative, using a descriptive-analytical approach, and secondary data are collected from relevant literature and analysed using thematic analysis. The results indicate that ATM accessibility, as a prerequisite for financial inclusion, requires a multidimensional approach including regulation, physical access, AI-based technology, services, and collaboration. This study also highlights the need for stricter, mandatory regulatory reform and recommends establishing national technical standards, strengthening inclusive banking services, and collaborating with persons with disabilities.

Fintech, Digital Banking, and Profitability Under Macroeconomic Pressure: Evaluating Regulatory and Institutional Implications for Indonesia’s Banking System

Sri Sulasmiyati, Adilla Sari Siregar — Wed, 23 Sep 2026 00:00:00 +0000

The digital banking era has introduced risks and opportunities that significantly affect bank profitability. This study examines 28 banks listed on the Indonesia Stock Exchange (IDX) between 2020 and 2022, focusing on the influence of credit risk, digital banking, and fintech on profitability, measured in this study by Return on Assets (ROA). Employing panel data analysis through EViews 12, two regression models were tested, one excluding and one including GDP as a control variable. Comparative results underscore Non-Performing Loans (NPLs) as the most consistent determinant, exerting a significant negative effect on ROA. While peerto-peer (P2P) lending initially appeared to hinder profitability, its impact diminished once macroeconomic conditions were controlled for. Moreover, although mobile banking adoption continues to expand, its immediate contribution to profitability remains statistically insignificant within this sample. Overall, the findings highlight credit risk as the primary concern, suggesting that stronger regulatory frameworks and enhanced collaboration between banks and fintech firms are essential to safeguarding financial stability. These insights emphasise the need for policymakers and banking executives to prioritise credit risk management while fostering a cooperative ecosystem to navigate the complexities of the digital transformation.

Analysing the Dynamics of Indonesian Banks’ Performance Under Artificial Intelligence Adoption: An Empirical and Simulation Approach

Muhammad Syakhsan Haq, M. Fathur Rahman, Ahmad Muzakki Aldi Pratama — Wed, 23 Sep 2026 00:00:00 +0000

This study analyses the impact of artificial intelligence (AI) on bank performance and financial stability in Indonesia using a combined empirical and simulation approach. Employing monthly panel data from 50 Indonesian banks during the period 2017–2023, the empirical analysis applies Feasible Generalised Least Squares (FGLS) and staggered Difference-inDifferences (DiD) estimators following Callaway and Sant’Anna to identify the effects of AI adoption. The results show that AI adoption increases Return on Assets (ROA) by 0.116 percentage points and reduces Non-Performing Loans (NPLs) by 0.068 percentage points, while AI chatbot implementation raises ROA by 0.189 percentage points and lowers the Loan-to-Deposit Ratio (LDR) by 3.18 percentage points. In contrast, AI training is associated with a short-run decline in ROA, reflecting implementation and adjustment costs. Staggered DiD estimates indicate that bank performance weakened during the COVID-19 period due to heightened liquidity pressures but stabilised in the post-pandemic phase, thereby contributing to improved financial stability. Complementing the empirical findings, a system dynamics simulation demonstrates that AI investments initially constrain profitability growth but yield accelerating gains over time through efficiency improvements and risk mitigation. Overall, the study highlights the importance of phased AI adoption and institutional readiness in strengthening bank performance and financial stability in Indonesia.

Transforming Financial Risk Management and Operational Efficiency: The Impact of AI Adoption in Indonesian Banks

Wed, 23 Sep 2026 00:00:00 +0000

This study investigates the impact of Artificial Intelligence (AI) adoption on operational efficiency and financial risk management in six major Indonesian banks: BNI, BRI, BCA, Danamon, Mandiri, and CIMB Niaga. The research implements Difference-in-Difference (DiD) methodology coupled with Bayesian Vector Autoregression (BVAR) Scenario Testing to assess how AI affects financial indicators comprising NPLs, ROA, CAR, and LDR. The study shows that AI adoption yields minor, immediate results but does not produce substantial improvements in financial performance or risk management when moving beyond Level 3. AI improves operational performance by enabling automated processes and optimised decisionmaking, leading financial institutions to enhance their fraud detection, credit risk management, and liquidity risk management. The study demonstrates the value of implementing AI through an orderly strategic plan while mandating that organisations establish rules and ethical guidelines for AI use throughout its adaptation stages. The implementation of AI by Indonesian banks offers multiple prospects to enhance their operational performance, risk management capabilities, and financial stability over the years.

Harmonising Bank Indonesia and OJK’s Authority in Addressing Financial Crimes

Dona Budi Kharisma, Kenny Reyza Feranda — Wed, 23 Sep 2026 00:00:00 +0000

This study evaluates the mechanism for addressing financial crimes through restorative justice (RJ) enacted by the Financial Services Authority (OJK) without the involvement of Bank Indonesia. This normative legal research employs a statutory and conceptual approach to analyse the institutional relationships in addressing financial crimes. The absence of Bank Indonesia’s participation in addressing financial crimes through RJ could undermine financial system stability. Law Number 4 of 2023 on the Development and Strengthening of the Financial Sector (Law on P2SK) grants the OJK exclusive investigative authority under the RJ mechanism. The development of digital financial crimes that exploit payment infrastructure has blurred the functional boundaries between the two institutions, raising concerns that the OJK’s exclusive authority over RJ discretion may fail to recognise threats to financial system stability that fall within Bank Indonesia’s mandate. This paper proposes reconstructing the Analysis Team by adopting a risk-based coordination model to address these issues. Based on an assessment of the risk associated with criminal activity in the financial services industry, the model places Bank Indonesia and the OJK within a proportional, collaborative framework. This collaboration aims to establish an effective law enforcement framework while comprehensively maintaining the stability of the national financial system.