BI to retain its supervisory grip
BI to retain its supervisory grip
JAKARTA (JP): The government and the House of Representatives
principally agreed on Monday to retain Bank Indonesia's banking
supervisory function until the end of 2002, paving the way to the
resolution of a key obstacle to a new central bank bill.
The chairman of the House's special team to deliberate the
central bank bill, Tayo Tarmidi, said the banking supervisory
role would be handed over from the central bank to a new
independent body after 2002.
He said the new body would supervise banks and all financial
services which manage public funds such as pension funds,
insurance and leasing firms and the capital market, effectively
eliminating the Capital Market Supervisory Agency.
"This is the result of our private meeting with the
government," he told reporters after meeting with Finance
Minister Bambang Subianto and Bank Indonesia Governor Sjahril
Sabirin.
Bambang told reporters separately that the new body would form
one of the three "pillars" of a reformed financial system.
"In the future we will have three pillars: the monetary system
handled by Bank Indonesia, the fiscal sector handled by the
Ministry of Finance, and the financial services sector under the
new body," he said.
Tayo added that the new independent body would be responsible
to both the country's Supreme Audit Agency and the House of
Representatives.
The House is scheduled to approve the new central bank bill on
April 16 at a plenary session.
The government and the House have been debating for a month
the new central bank bill, designed to boost Bank Indonesia's
independence, and faced a deadlock over a proposal to hand over
the central bank's banking supervisory role to a new agency by
the middle of 2000.
The House insisted that the banking sector should continue to
be supervised by Bank Indonesia, while the government proposed a
separation of the role, allowing the central bank to concentrate
on designing monetary policy and monitoring the flow of payments.
Separately, the chairwoman of the Federations of Domestic
Private Banks, Gunarni Soeworo, said on Monday it would not make
much difference whether the supervisory function was retained by
the central bank or handled by a new independent body.
She stressed that what matters is the effectiveness of the
supervision.
The deputy chairman of the federation of national private
banks (Perbanas) Wibowo Ngaserin said, "I think what's more
important is good governance".
A banking analyst with a securities firm said that as the bank
supervisory function would have a "policeman's role" to ensure
that the country's banking population doesn't violate the banking
regulations, it must maintain public credibility by showing that
no well connected businessmen can meddle with its work.
Bank Indonesia has lost its credibility as its decisions have
been frequently undermined by political intervention,
particularly with the delay of banking closures in February,
which raised speculation that powerful people had worked to
prevent certain banks from going down.
The weekly Kontan reported in its latest edition that the
central bank had paid about Rp 60 billion (US$6.8 million) to
House members to keep the banking supervisory role within the
central bank.
In a joint conference with the House's special team on the
central bank bill on Monday, Sjahril flatly denied the report.
"It's absolutely not true. It's slander," he said, adding that
such a report was detrimental to government confidence-building
efforts. (rei)