BI plans for banking mediation agency

The Jakarta Post, Jakarta

The central bank is to start initiating plans for the establishment of a mediation agency to help settle disputes between banks and their customers, a senior Bank Indonesia official said on Tuesday.

If everything went well, the agency could be established sometime next year, deputy governor Maman Sumantri said.

"We expect all preparations to be completed soon and the agency could be set up in 2005. But the BI will only provide guidance in the process," he said.

Maman, who was speaking after a seminar on the issue, added the move was in line with the Indonesian Banking Architecture (API) guidelines, notably on efforts to educate and empower banking customers.

The mediation agency is to function like an independent arbitration body, and will provide support to the disputing parties and try to resolve commercial disagreements in the fairest manner, Maman said.

He did not mention the kind of disputes that could be resolved through the body, saying only that all details were to be discussed by relevant parties, including the banking sector and the Indonesian Customers Foundation (YLKI).

Another item of discussion high on the agenda was in regards the regulations and laws upon which the mediation agency would be based -- the Consumer Protection Law, Banking Law or Arbitration Law.

Mulyaman Hadad, head of the BI financial stability division, said the establishment of the body would bode well for the development of the national banking industry.

"The banking sector needs this kind of body, because when (banks) do not handle complaints well, it diminishes their reputation as a service-based institution," said Hadad, adding that similar bodies had long been in place in neighboring countries.

Meanwhile, in regards efforts to educate and empower customers, Maman said the central bank was drafting a regulation that required banks to provide sufficient data on their products to avoid misleading the public or customers.

"Under this ruling, banks will be obliged to inform the public not just about the potential benefits of each product, but also their potential risks," he said, adding that a violation of the regulation would incur sanctions.

"If a risk exists, it must be explained. For instance, if a bank is offering mutual funds, it must declare the product is not guaranteed under the blanket program," he said, referring to a program that guarantees financial liabilities of a bank when it collapses.

He added the ruling aimed to enhance customer protection.