Reuters reports that Indonesia’s parliament?? approved Thursday a long-delayed bill creating a new regulator to oversee the country’s growing financial industry
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Here’s the link and introduction to the piece
http://www.reuters.com/article/2011/10/27/indonesia-regulation-idUSL3E7LR0MA20111027
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The new regulator, to be known as the OJK, will take over the supervision of banks, brokerages and insurance firms from the central bank and capital market watchdog Bapepam-LK starting from 2013.
OJK, or Otoritas Jasa Keuangan, translates as Financial Services Authority and is based in part on the UK’s FSA.
The move to create the body came about to avoid a repeat of the 1997/98 financial crisis, during which many Indonesians banks collapsed or were shut.
However, analysts say Bank Indonesia (BI) has improved banking supervision in recent years, and some were skeptical whether the OJK could do a better job than the central bank at a time of global economic uncertainty rooted in the euro zone crisis and U.S. woes.
“The banking sector is confused on why the OJK should be founded because Bank Indonesia’s supervision is good…Our banks have the strongest financial indicators in Southeast Asia due to Bank Indonesia’s role,” said Juniman, an economist at Bank Internasional Indonesia (BII) in Jakarta.
“This is a political decision,” he added.
In the 2008 global credit crisis, Indonesia’s banks were well capitalised and mostly escaped unscathed, though the government bailed out one small lender over fraud, creating a political storm that later brought down the finance minister.
Lawyers said Bank Indonesia’s long history as banking regulator means the new body may struggle to avoid the central bank’s influence.
“BI, which has been a part of Indonesia from day one, will certainly out-rank OJK in terms of their know-how, experience and in-depth knowledge of Indonesian monetary (policy) and banking,” said Indri Pramitaswari Guritno, a partner at Hadiputranto, Hadinoto & Partners, a Jakarta law firm.
“Taking this into account, purely from a logical perspective, there could be a possibility that BI will still be given certain autonomy,” she added.
