Govt plans supervisory board for Bank Indonesia

Berni K. Moestafa, The Jakarta Post, Jakarta

The government plans to set up a supervisory board within Bank Indonesia as one of several measures under the new central bank bill to increase its accountability.

Article 58A of the central bank bill would authorize the board to evaluate the performance of Bank Indonesia's board of governors and audit the central bank's operations.

Its members, four at most, would be appointed by the President and approved by legislators. Integrity, reputation and sound knowledge in banking, law and economics would form the bases for the selection of the board's members.

Director General for Financial Institutions Darmin Nasution said on Monday that the government felt the need for more control over Bank Indonesia.

"Bank Indonesia isn't accountable to anyone, and only the DPR (House of Representatives) keeps an eye on it," he told reporters on the sidelines of a discussion on the bill with House Commission IX for financial affairs.

Other powers of the supervisory board would include approving Bank Indonesia's working budget and giving recommendations to the House and the President on the performance of the governors and the central bank.

The government resumed talks this month with the House on amending the central bank law, after suspending it since May last year.

One key point of the talks has been Bank Indonesia's accountability, which has came under fire since an audit in 2000 revealed the central bank misdirected some US$13 billion in emergency loans for local banks during the late 1990s.

Demands for a reshuffle of Bank Indonesia's top management were blocked by the present central bank law.

Under Law No 23/1999 on Bank Indonesia, its board of governors cannot be replaced before their terms expire unless they resign, are incapacitated or are proven guilty of a crime.

Since late 2000, the government and legislators have worked on amending the central bank law. However, progress has been slow.

One reason has been opposition from the International Monetary Fund (IMF), under whose supervision Bank Indonesia was when it allegedly misused the emergency loans.

The IMF has argued that meddling with the central bank law would risk Bank Indonesia's independence after decades of harsh political intervention.

In contrast to the current law, the bill allows members of political parties to become a member of Bank Indonesia's board of governors.