Govt urges House to quickly complete amendment of BI law<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The government urged on Friday the House of Representatives to
\nquickly approve the proposed bill on the amendment of the central
\nbank law because a further delay would cause a costly set back in
\nother key financial sector reform programs.<\/p>\n
"If the amendment of the central bank law is delayed, other
\nprograms would also be affected," Director General of Financial
\nInstitutions of the Ministry of Finance was quoted by detik.com
\nas saying.<\/p>\n
The government and the House's special committee have been
\ndebating the bill on the amendment of Law No. 23\/1999 on Bank
\nIndonesia for two years now. The snail's pace process was mainly
\ndue to strong opposition from the central bank over the proposed
\ncontents of the bill.<\/p>\n
The deliberation was supposed to be completed on Thursday, but
\nas the central bank continued to oppose certain key issues, the
\nHouse committee decided to extend the deliberation process for an
\nindefinite period of time. The current House sitting is scheduled
\nto end on Sept. 26 and to resume in late October.<\/p>\n
Darmin hoped the House could complete the amendment process by
\nthe end of this year.<\/p>\n
He explained that without the completion of the bill, the
\ngovernment could not proceed with other key financial sector
\nreform programs, among others, a gradual termination of the
\ncostly blanket guarantee program and setting up an insurance
\ndeposit scheme.<\/p>\n
Darmin said that the government was hopeful that if a new
\ncentral bank law could be approved by the end of this year, the
\ngovernment could start the gradual elimination of the blanket
\nguarantee program next year.<\/p>\n
The blanket guarantee program was introduced in 1998 when
\nconfidence in the banking sector was at a low. Under this
\nprogram, the government guarantees all obligations of closed down
\nbanks.<\/p>\n
The government now intends to gradually stop the guarantee
\nprogram because it is costly and creates moral hazards for banks.
\nUnder this plan, the government will stop its guarantee on bank
\nobligations except on time deposits, saving accounts and
\ninterbank loans. The government expects this step to be realized
\nin June 2004. The second phasing out stage would only guarantee
\ntime deposits sized at no more than Rp 100 million, and this is
\nexpected to materialize in January 2005. By this time, the
\ngovernment expects that the law on the establishment of an
\ninsurance deposit scheme -- which will replace the government's
\nblanket guarantee program -- will already be approved by the
\nHouse.<\/p>\n
But this program may be further delayed as the central bank
\ncontinues to oppose the government's proposals. Bank Indonesia,
\nfor instance, has strongly opposed a proposal to set up an
\nindependent supervisory board, particularly if the board is
\nauthorized to assess the Bank's monetary policies and can
\nrecommend the dismissal of members of the board of governors.<\/p>\n
The Ministry of Finance has said that the supervisory board is
\ncrucial to ensure accountability and improve corporate governance
\nof the central bank.<\/p>\n
Another controversial issue is the disagreement over a plan to
\nset up a new agency called the financial services authority
\n(FSA), which will take over Bank Indonesia's role in supervising
\nand regulating the banking sector. The central bank is less than
\nhappy with the proposal.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-urges-house-to-quickly-complete-amendment-of-bi-law-1447893297",
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"sponsor": "Okusi Associates",
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