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FORMOSA NEWS - Medan - Indonesian Supreme Court Decision Triggers Risk of Over-Criminalizing Banking Business Policy. A landmark legal study published in 2026 warns that Indonesian law enforcement officials are increasingly failing to distinguish between normal business risks and genuine banking crimes. Conducted by legal scholars Bongot Tua Sinaga and Ida Nadirah from the Universitas Muhammadiyah Sumatera Utara (UMSU), the research reveals how an overly broad interpretation of the "prudential principle" is causing a wave of unjustified criminalizations against bank directors. Published in the International Journal of Law Analytics (IJLA), the study highlights that confusing contractual defaults with malicious financial fraud threatens the stability of the entire national banking sector
The Clash Between Business Risks and Criminal Law
At the heart of the issue is a fundamental legal distortion in how banking operations are treated when financial losses occur. In a healthy economy, banks act as financial intermediaries, a function that inherently carries the risk of non-performing loans (NPLs) and credit defaults. Under the Indonesian Civil Code, loan agreements are governed by the principle of freedom of contract, making credit defaults a strict matter of civil law. However, current law enforcement trends show an alarming anomaly where civil contractual failures are aggressively pushed into the criminal realm. Investigators and prosecutors frequently equate a corporation’s financial loss due to market dynamics with intentional malice (mens rea). This dangerous trend is epitomized by the Supreme Court Cassation Decision No. 8506 K/Pid.Sus/2025. In this specific case, the court of first instance originally handed down an acquittal (onslag), recognizing that the defendant's actions fell under perdata (civil) business risks. Yet, the Supreme Court abruptly annulled the release, sentencing the bank director to three years in prison and a Rp5 billion fine. According to Bongot Tua Sinaga and Ida Nadirah of Universitas Muhammadiyah Sumatera Utara, this decision sets a chilling precedent by punishing administrative or business outcomes without proving actual criminal intent.
Methodology: Analyzing Legal Doctrines and Judicial Decisions
To examine the boundaries of criminal liability for bankers, the researchers at Universitas Muhammadiyah Sumatera Utara utilized a normative legal research methodology, commonly referred to as doctrinal law research. The study employed three core analytical approaches:
The findings of this Universitas Muhammadiyah Sumatera Utara study carry severe implications for the Indonesian economy. When the judiciary uses criminal law as a first weapon (primum remedium) instead of a last resort (ultimum remedium), it triggers a severe "chilling effect" across the banking industry. Fearing arbitrary imprisonment, bank managers will become excessively risk-averse, severely restricting the flow of productive credit to businesses, entrepreneurs, and the wider society. Furthermore, over-criminalization does nothing to fix bank balance sheets. Imprisoning a director over a bad loan fails to provide economic asset recovery, whereas civil litigation and administrative sanctions by the Otoritas Jasa Keuangan (OJK) are designed to directly protect and recoup funds. Commenting on the critical need for systemic reform, Ida Nadirah noted that without clear dogmatic parameters and absolute legal certainty, the investment climate and standard banking operations will remain paralyzed by the fear of arbitrary law enforcement. The authors argue that the Supreme Court's shift toward penalizing general corporate losses ignores the reality that credit distribution inherently coexists with market risks.
Author Profiles
Bongot Tua Sinaga, S.H., M.H. is a legal scholar and researcher affiliated with the Universitas Muhammadiyah Sumatera Utara (UMSU). His primary area of expertise lies in banking crime analysis, criminal liability theory, and corporate jurisprudence.
Ida Nadirah, S.H., M.H. is a senior academic and lecturer at the Universitas Muhammadiyah Sumatera Utara (UMSU). She is an expert in civil law, contract validity, bankruptcy law reform, and good corporate governance.
Source
Bongot Tua Sinaga, Ida Nadirah. The Criminalization of Banking Business Risks: A Review of the Business Judgment Rule in Light of Supreme Court Decision No. 8506 K/Pid.Sus/2025. International Journal of Law Analytics (IJLA), Vol. 4, No. 2, Tahun 2026: Halaman 309-318.
DOI :https://doi.org/10.59890/ijla.v4i2.204
URL: https://journal.multitechpublisher.com/index.php/ijla
The Clash Between Business Risks and Criminal Law
At the heart of the issue is a fundamental legal distortion in how banking operations are treated when financial losses occur. In a healthy economy, banks act as financial intermediaries, a function that inherently carries the risk of non-performing loans (NPLs) and credit defaults. Under the Indonesian Civil Code, loan agreements are governed by the principle of freedom of contract, making credit defaults a strict matter of civil law. However, current law enforcement trends show an alarming anomaly where civil contractual failures are aggressively pushed into the criminal realm. Investigators and prosecutors frequently equate a corporation’s financial loss due to market dynamics with intentional malice (mens rea). This dangerous trend is epitomized by the Supreme Court Cassation Decision No. 8506 K/Pid.Sus/2025. In this specific case, the court of first instance originally handed down an acquittal (onslag), recognizing that the defendant's actions fell under perdata (civil) business risks. Yet, the Supreme Court abruptly annulled the release, sentencing the bank director to three years in prison and a Rp5 billion fine. According to Bongot Tua Sinaga and Ida Nadirah of Universitas Muhammadiyah Sumatera Utara, this decision sets a chilling precedent by punishing administrative or business outcomes without proving actual criminal intent.
Methodology: Analyzing Legal Doctrines and Judicial Decisions
To examine the boundaries of criminal liability for bankers, the researchers at Universitas Muhammadiyah Sumatera Utara utilized a normative legal research methodology, commonly referred to as doctrinal law research. The study employed three core analytical approaches:
- Statute Approach: A comprehensive review of applicable laws, including Law No. 10 of 1998 concerning Banking, Law No. 4 of 2023 concerning the Development and Strengthening of the Financial Sector (PPSK), and the Indonesian Civil Code.
- Conceptual Approach: Drawing upon fundamental legal doctrines such as the Business Judgment Rule (BJR), the principle of ultimum remedium (criminal law as a last resort), and dualistic criminal liability theories.
- Case Approach: A detailed critical analysis of the judicial reasoning (ratio decidendi) behind the controversial 2025 Supreme Court Cassation Decision. The gathered data were analyzed using qualitative-normative methods to assess whether the judiciary is correctly applying standard corporate protections.
Key Findings: The Shield of the Business Judgment Rule
The study by Bongot Tua Sinaga and Ida Nadirah identifies major systematic failures in current banking law enforcement and outlines the proper legal boundaries that must be respected:
- Reductions in Legal Terminology: Law enforcement officials routinely confuse "Banking Crimes" (internal structural misconduct by bank organs) with "Crimes in the Banking Sector" (where the bank is merely a victim or a neutral tool). This ambiguity allows authorities to use sweeping regulations to criminalize ordinary credit management.
- The Protections of the Business Judgment Rule (BJR): The researchers emphasize that financial losses or bad loans cannot be constructed as a crime if the directors acted under the protection of the BJR. The BJR acts as a "safe harbor" providing legal immunity if four cumulative criteria are met: the decision was made in good faith, there was no conflict of interest or bribery, a careful risk analysis was performed according to standard operating procedures (SOP), and the choice was decided collectively.
- The Absence of Niat Jahat (Mens Rea): A fundamental tenet of criminal law is Geen Straf Zonder Schuld no crime without fault. Weaknesses in administrative analysis or minor procedural flaws represent administrative negligence (culpa), not intentional malice (dolus) to defraud a bank.
The findings of this Universitas Muhammadiyah Sumatera Utara study carry severe implications for the Indonesian economy. When the judiciary uses criminal law as a first weapon (primum remedium) instead of a last resort (ultimum remedium), it triggers a severe "chilling effect" across the banking industry. Fearing arbitrary imprisonment, bank managers will become excessively risk-averse, severely restricting the flow of productive credit to businesses, entrepreneurs, and the wider society. Furthermore, over-criminalization does nothing to fix bank balance sheets. Imprisoning a director over a bad loan fails to provide economic asset recovery, whereas civil litigation and administrative sanctions by the Otoritas Jasa Keuangan (OJK) are designed to directly protect and recoup funds. Commenting on the critical need for systemic reform, Ida Nadirah noted that without clear dogmatic parameters and absolute legal certainty, the investment climate and standard banking operations will remain paralyzed by the fear of arbitrary law enforcement. The authors argue that the Supreme Court's shift toward penalizing general corporate losses ignores the reality that credit distribution inherently coexists with market risks.
Author Profiles
Bongot Tua Sinaga, S.H., M.H. is a legal scholar and researcher affiliated with the Universitas Muhammadiyah Sumatera Utara (UMSU). His primary area of expertise lies in banking crime analysis, criminal liability theory, and corporate jurisprudence.
Ida Nadirah, S.H., M.H. is a senior academic and lecturer at the Universitas Muhammadiyah Sumatera Utara (UMSU). She is an expert in civil law, contract validity, bankruptcy law reform, and good corporate governance.
Source
Bongot Tua Sinaga, Ida Nadirah. The Criminalization of Banking Business Risks: A Review of the Business Judgment Rule in Light of Supreme Court Decision No. 8506 K/Pid.Sus/2025. International Journal of Law Analytics (IJLA), Vol. 4, No. 2, Tahun 2026: Halaman 309-318.
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