BI seeks support in fight against poverty

BI seeks support in fight against poverty

The Jakarta Post, Jakarta

Bank Indonesia Governor Burhanuddin Abdullah met on Tuesday with leaders of the House of Representatives as part of lobbying efforts to delay the establishment of the Financial Services Authority Institution (FSAI), which will take over the central bank's banking supervisory role.

He told reporters following the meeting that extensive study and more preparations were needed to ensure that the FSAI would be beneficial and not create problems.

"We all agree that the FSAI is important, but there are (currently) various hurdles in establishing it," said Burhanuddin, who recently became the governor.

The FSAI would not only assume the central bank's banking supervisory role, but would also take over the supervisory role in other financial service-related industries such as the capital market, insurance and pension funds.

The importance to set up the FSAI came amid increasing challenges facing the financial services industry in the fast- changing global economy.

The Ministry of Finance's directorate general of financial institutions, which is in charge of designing and setting up the FSAI, plans to submit a draft law on the institution to the House later this year with a forecast of the FSAI becoming fully operational by 2006.

But Burhanuddin, who was previously the central bank's main negotiator in talks with the finance ministry, has said that preparations to set up an effective FSAI would need between five and ten years.

House leaders seem to be favoring Burhanuddin's position.

Chairman of the House Commission IX on financial affairs Max Moein said that the country's banking sector was not yet ready for the FSAI.

He pointed out that the financing for the FSAI would have to come from the banking and finance industry while at the same time most banks were still in a difficult financial state.

"If the bill (on FSAI) is ready, we'd still need to wait until the banks have recovered (from the crisis) before we can set up the FSAI," Max said.

He added that even in other developed nations, setting up such a key institution would need a long period to prepare the human resources, organization and system.

By transferring the central bank's supervisory role of local banks, Bank Indonesia's main focus would be on creating a stable macroeconomic condition, a mandate stipulated under the 1998 central bank law.