FSAI to be set up within three years, govt says
FSAI to be set up within three years, govt says
The Jakarta Post, Jakarta
The Ministry of Finance said that a new agency called the
Financial Services Authority Institution (FSAI) would be ready to
take over the central bank's banking supervisory role within
three years.
But Bank Indonesia has demanded a longer period in an apparent
struggle between the government and the independent central bank,
which may lead to a further delay in the setting up of the key
institution.
The FSAI will be a powerful institution as it will not only
supervise the banking industry, but also other related services
such as insurance, pension funds, and securities.
By transferring the central bank's banking supervisory role,
Bank Indonesia's main focus would be on creating a stable macro
economic condition, a mandate stipulated under the 1998 central
bank law.
The impetus to set up the FSAI came amid increasing challenges
facing the financial services industry in the fast-changing
global economy.
The government initially planned to set up the FSAI next year,
but it has been delayed due to protests from players in the
financial industry.
Director general of financial institutions of the finance
ministry Darmin Nasution said on Friday that the ministry wanted
to see the FSAI in operation by 2006, assuming that the bill to
formalize its establishment is approved by the House of
Representatives this year.
"Three years from now is sufficient time to prepare the human
resources, system, organization as well as regulations," Darmin
said.
He said the bill on FSAI was still being prepared at the State
Secretariat.
But Bank Indonesia has a different view. Newly appointed
central bank Governor Burhanuddin Abdullah said recently that
preparation for setting up an effective FSAI would need between
five and ten years.
He said that hasty preparation would create various technical
problems, such as a lack of qualified personnel and effective
coordination, which may in turn lead to chaos in the financial
sector particularly in the banking industry which has just
started to recover from the late 1990s crisis.
Darmin dismissed the observation that there was a serious
struggle between the finance ministry and Bank Indonesia over the
time frame target for the FSAI, saying that the two sides could
sit together to settle any differences.
Darmin explained that the establishment of the FSAI was urgent
because of the deep-rooted conglomeration practice in Indonesia's
economy as evident in the cross-ownership between the financial
service industry and the real sector economy.
"It would be more effective if the supervision of the
financial sector is in one hand," he said, adding that financial
products seem to be becoming more and more borderless.
The late 1990s banking crisis has been partly attributed the
abuse of power by bankers who transferred depositors money to
their affiliated business groups without making proper
assessments.