The Impact of Regulation on Islamic Financial Institutions Towards The Monopolistic Practices in Banking Industrial in Aceh Indonesia

The ratification of Aceh regulation (Hereafter called Qanun) Number 11 of 2018 concerning Islamic Financial Institutions (Hereafter called Qanun LKS), has provided special rights for Islamic banking institution, while non-Islamic banking institutions are not permitted to run their business in the province. At the same time, the central government also decided to merger three stated-owned Islamic banks, namely BNI Syariah, BRI Syariah, and Mandiri Syariah to become Bank Syariah Indonesia (BSI). These policies have potentially violated Law on Anti-Trust, especially in Aceh Province. This article aims to analyse whether the local government's policy in enacting the Qanun LKS, as well as consolidating the BSI is part of monopoly practices and unfair business competition in the banking sector in the Aceh region? This research classified as a normative qualitative research, where data is obtained from secondary sources, such as laws, books, journals and related studies. The results show that the enactment of Qanun LKS has created a restriction for conventional banking to expand their business in the region. In addition, the government’s policy to consolidate of three state-owned Islamic banks, which control more than seventy-five of market share in Aceh province, is considerably contrary to the Law on the Prohibition of Monopolistic Practices and Unfair Business Competition Number 5 of 1999.