Govt plans supervisory board for Bank Indonesia

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.