Hope, skepticism mix over FSAI plan<\/p>\n
Evi Mariani, The Jakarta Post, Jakarta<\/p>\n
The government's plan to establish a one-roof financial
\nregulatory and supervisory institution called the Financial
\nServices Authority Institution (FSAI), has raised hope and
\nskepticism among economists, financial regulators and market
\nplayers as the institution would have a very powerful role.<\/p>\n
According to a draft law on the planned FSAI, the board's
\nseven commissioners, six of whom are to be appointed by the
\npresident and one by the governor of the central bank, would have
\ntasks to give and abrogate licenses to financial institutions as
\nwell as to regulate and supervise them.<\/p>\n
Presently, a debate on the FSAI is developing, especially
\nabout the timeframe of its establishment.<\/p>\n
The director general of financial institutions at the Ministry
\nof Finance, Darmin Nasution, said that the ministry wanted to see
\nthe FSAI operating by 2006.<\/p>\n
On the other hand, Bank Indonesia has demanded a longer
\npreparation time for establishing the FSAI, with Central Bank
\nGovernor Burhanuddin Abdullah saying that an effective
\ninstitution would require about five to 10 years. Central bank
\nofficials have quietly lobbied key figures at the House of
\nRepresentatives to delay the planned institution.<\/p>\n
The Ministry of Finance argued that the country was already in
\nneed of the FSAI as financial products had become more
\nintegrated. Consequently, the government said the current system
\nwas no longer adequate. Under the current system, the supervisory
\nand regulatory roles of the banking industry had been entrusted
\nto Bank Indonesia, the stock market to the Capital Market
\nSupervisory Agency (Bapepam) and insurance services and other
\nproducts to the Ministry of Finance.<\/p>\n
The Asian Development Bank (ADB), one of the country's major
\nforeign lenders, has also insisted that the FSAI be set up
\nimmediately, according to the government.<\/p>\n
Therefore, the government has been brewing the concept of the
\nFSAI, after learning of operations of similar institutions in
\nother countries, such as Britain, Australia, South Korea and
\nCanada.<\/p>\n
"The sooner we have it in place the better because there have
\nbeen a lot of problems, such as complicated conglomeration in our
\nfinancial system," said economist Didik Rachbini.<\/p>\n
But others disagree.<\/p>\n
"Establishing a new institution (FSAI) would be costly and
\nmight not be effective," economist Dradjad Wibowo, the director
\nof the Institute for Development of Economics and Finance
\n(Indef), told The Jakarta Post.<\/p>\n
"Moreover, I've heard that the salary of the planned
\ninstitution's chief commissioner could hit Rp 120 million
\n(US$14,000) a month," he said.<\/p>\n
In the draft law, it is stated that the FSAI will be funded
\nwith fees collected from financial institutions. The amount of
\nthe fees will depend on the size of each institution's assets and
\nthe amount of its bad loans; the larger the assets and the bad
\nloans, the higher the fees.<\/p>\n
Dradjad recognized the ineffectiveness of the current system,
\nbut said "why don't we improve and optimize the existing
\n(supervisory) institutions instead?"<\/p>\n
It seems that there is still plenty of time for debate, as the
\nHouse is not in a rush to deliberate the bill.<\/p>\n
"The schedule for the deliberation of the bill is in August.
\nWe don't have to rush," Max Moein, a member of the House's
\nCommission IX for financial affairs, told the Post on Friday.<\/p>\n
Britain introduces first FSA<\/p>\n
In the government's academic draft on the FSAI, Britain is
\nmentioned as the first country to transfer the banking
\nsupervisory and regulatory roles from its central bank to an
\ninstitution called the Financial Services Authority (FSA) in
\n1997.<\/p>\n
The FSA aims to maintain confidence in the financial system,
\npromote public understanding, protect consumers of financial
\nservices and reduce financial crimes.<\/p>\n
Canada also has this authority -- the Office of the
\nSuperintendent of Financial Institutions (OSFI). Not different
\nfrom Britain's FSA, Canada's OSFI is also designed to protect
\nconsumers as part of its objectives.<\/p>\n
In 1999, according to a Central Banking Publications report,
\n65 percent of industrial countries give banking supervisory and
\nregulatory roles to institutions outside central banks while 35
\npercent to central banks.<\/p>\n
Among developing countries, 78 percent give the role to
\ncentral banks and 22 percent to institutions outside central
\nbanks.<\/p>",
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