Work

Reengineering Financial Stability in a Digital Era: SmartPLS Evidence from Indonesia’s Financial Institutions

Year: 2026

Type: article

Abstract: Purpose: This study investigates the interplay among digitalisation, deposit insurance systems, bank resolution mechanisms, and policy guarantee frameworks to enhance financial stability, with specific attention to the operational context of Indonesia's Deposit Insurance Corporation (LPS). Methodology: A quantitative research design was undertaken, and a sample of 265 senior practitioners in the financial field, including banking executives, governmental regulatory officials, and policymakers, was used. SmartPLS was used to test the structural associations among digitalisation, deposit guarantee resilience, mechanisms of resolution, governance quality, and financial stability. Findings: The results show that digitalisation is positively associated with financial stability through operational efficiency, real-time oversight, and proactive risk mitigation. Strong deposit insurance frameworks and practical resolution tools were found to be significantly correlated with low systemic vulnerability and low systemic contagion risk. Governance quality is found to moderate these relationships, especially in terms of aligning regulatory intentions with market confidence in emerging economies such as Indonesia. Research limitations/implications: The study provides actionable results for policymakers and financial authorities in focusing on developing a presence of advanced new digital tools in not only modernizing deposit insurance procedures, but also to improve resolution frameworks using data utilization promptly, as well as the strengthening of governance practices to achieve more responsible regulatory oversight of the financial sector. Originality/value: This research builds the financial stability literature through empirical research on the relationships between digital innovation and institutional resilience mechanisms. It offers a novel framework linking digitalisation, deposit insurance effectiveness and the capacity to resolve within the context of emerging financial systems.

Source: GLOBAL BUSINESS & FINANCE REVIEW

DOI: 10.17549/gbfr.2026.31.10.131

Authors: Sugeng Suroso, Muhammad Asif Khan, Sri Wulandari

Institution: Universitas Bhayangkara Jakarta Raya

Language: English

Topic: Banking stability, regulation, efficiency

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Industry, innovation and infrastructure, Decent work and economic growth, Peace, justice, and strong institutions

Open Access status: gold

Estimated APC paid: $500