TRANSFORMATIVE EFFECTS OF OMNIBUS FINANCIAL LAW (UU P2SK) ON RISK MANAGEMENT AND FINANCIAL PERFORMANCE IN ISLAMIC BANKS

Abstract

This study investigates the impact of Indonesia’s Financial Omnibus Law (UU P2SK) on the risk management practices and financial performance of Islamic banking institutions. Employing an event study design, the research analyzes data from 11 Islamic commercial banks over the 2022–2024 period, using key risk and performance indicators such as Non-Performing Financing (NPF), Financing to Deposit Ratio (FDR), Liquidity Coverage Ratio (LCR), Operating Expense to Operating Income Ratio (BOPO), Return on Assets (ROA), and Return on Equity (ROE). The findings suggest that the UU P2SK has significantly improved credit risk governance and profitability, particularly evident through decreased NPF and increased ROA and ROE, while liquidity improvements are partially support-ed. However, operational efficiency (BOPO) remains relatively unchanged. These results confirm the institutional theory framework, where regulatory pressures lead to behavioral and structural changes in organizations.  The study provides actionable insights for regulators, financial institutions, and policymakers in enhancing the resilience and competitiveness of Islamic banking.