BLBI team to advise on financial sector reform
BLBI team to advise on financial sector reform
The Jakarta Post, Jakarta
The International Monetary Fund (IMF) said its special team of
experts assigned to help decide the burden sharing between the
government and the central bank over losses resulting from abuse
in bank liquidity support facility (BLBI) will have a much bigger
task than earlier reported.
IMF representative David C. Nellor said on Friday the team
would also give recommendations on ways to create a sustainable
financial relationship between the government and Bank Indonesia.
"... The issue concerns the relationship of the central bank,
the government and the budget, including the government bonds
which are on the balance sheet of the central bank," Nellor said.
He was speaking to reporters after accompanying two foreign
banking experts in a meeting with officials of Bank Indonesia and
the Ministry of Finance.
The foreigners are part of the team set up to provide
recommendations to the government, the central bank and
legislators on how to resolve the protracted dispute over who
should bear the losses resulting from the misuse in a US$14
billion loan facility channeled to ailing banks in the wake of
the 1997 financial crisis.
The government has refused to cover the cost until Bank
Indonesia agrees to be responsible at least for part of the
abused loan.
The government and the central bank were supposed to resolve
the dispute last year.
Nellor did not elaborate further, but his statement comes at a
time when the government is planning major changes in the
country's financial system and monetary supervision.
In the next two years at the latest, the government hopes to
establish the Financial Services Authority Institution (FSAI).
The institution would take over the authority to supervise
banks currently held by Bank Indonesia. It would also oversee
other service-based financial industries such as insurance,
pension funds, securities and other institutions or corporations
managing public funds.
Preparations are now underway with the government hoping that
the House of Representatives will approve the bill, which will be
act as the legal basis for FSAI, by the end of the year.
The foreign experts appointed by the IMF to the team are John
Crow, former Canada central bank governor, and Stephen Rod, a
former member of U.S. Federal Reserves board of directors.
As stated in the LoI, the team would consist of local and
overseas independent banking experts. But it was not clear as to
precisely how many experts would make up the team.
However, according to BI governor Sjahril Sabirin, three local
experts have been selected as candidates.
"There are three (candidates), but I do not know whether they
have been officially appointed," Sjahril said.
He added that the three were former finance minister Frans
Seda, former BI governor Arifin Siregar and banking law expert
Pradjoto.