BI opposes plan to set up supervisory board<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
Bank Indonesia (BI) is opposing a plan to set up a supervisory
\nboard for the central bank to boost its accountability, saying
\nthat the proposal lacked clarity.<\/p>\n
"The intention of setting up the board is good, but what
\nhappens in Indonesia is that good intentions are usually
\ntransformed into something bad by particular vested interests,"
\nsaid Bank Indonesia Governor Burhanuddin Abdullah on the
\nsidelines of a hearing with the House finance commission.<\/p>\n
He said that even if the House decided to approve the plan, it
\nmust make sure that the supervisory board would not intervene in
\nthe management of the central bank and thereby interfere with its
\nindependence.<\/p>\n
He said that Bank Indonesia would welcome the board if it was
\nfocussed on improving governance and institutional capacity in
\nthe central bank.<\/p>\n
Disagreement over a government proposal to set up the
\nsupervisory board has been one of the main sticking points in the
\nprocess of amending Law No. 23\/1999 on Bank Indonesia.<\/p>\n
Under the proposal, the board would consist of five members to
\nbe nominated by the President and selected by the House, and
\nwould report periodically to the House.<\/p>\n
The government wants to include the establishment of the board
\nin the amendment in order to set up a control mechanism to
\nsupervise and monitor the performance of the central bank's board
\nof governors. The supervisory board would also have the power to
\ndismiss members of the board of governors.<\/p>\n
The current central bank law makes the position of the
\ngovernors almost unassailable, with the result that they are very
\ndifficult to remove. There are only three ways for them to be
\nreplaced: through resignation, disability or tenure expiration.<\/p>\n
Burhanuddin strongly disagreed with the proposal to provide
\nthe supervisory board with the power to discharge members of the
\nboard of governors as this could become prone to "misuse by
\ncertain people."<\/p>\n
"The duties of the board should be limited to the supervision
\nof risk management, regulatory compliance and good corporate
\ngovernance in the central bank. But these duties are already
\nbeing performed by our audit board. So why bother (creating a new
\nbody)," he said.<\/p>\n
He added that under the current system, the House and the
\nSupreme Audit Agency both played supervisory roles.<\/p>\n
Meanwhile, lawmakers said that the government and Bank
\nIndonesia had basically reached agreement on other contentious
\nissues. The two sides had agreed that the central bank's lender
\nof last resort role needed to be revived.<\/p>\n
They also agreed to set up a Financial Services Authority
\n(FSA) by 2008.<\/p>\n
The FSA would take over the roles of supervising and
\nregulating the central bank.<\/p>\n
Previously the government had demanded that the FSA, which
\nwould oversee the country's financial sector, be set up by 2006,
\nwhile Bank Indonesia has said it should only be established in 10
\nyears time, arguing that the banking sector was still weak.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bi-opposes-plan-to-set-up-supervisory-board-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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