BI plans for banking mediation agency

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.