Govt ready to submit FSAI draft law to the House
The Jakarta Post, Jakarta
President Megawati Soekarnoputri has issued a decree stipulating that the draft law on Financial Services Authority Institution (FSAI) is ready to be submitted to the House of Representatives for deliberation.
A source at the Ministry of Finance said that the ministry planned to submit the draft law to the House on Monday.
The government has planned to set up the FSAI, which would serve as the top watchdog of the country's financial services- related industries. The institution would take over the supervisory role of the central bank, and similar roles in the capital market, insurance and pension service industries.
The finance ministry, which is in charge of setting up the institution, expects the House to complete the deliberation of the draft law later this year, so that the FSAI would be fully operational by 2006.
However, Bank Indonesia has called for a delay in setting up the FSAI.
Earlier this week, central bank Governor Burhanuddin Abdullah met with House leaders to seek political support for its demand.
Burhanuddin said that preparations to set up an effective FSAI would take between five to 10 years.
He added that the country's financial service industries, particularly the banking sector that has just started to recover from the late-1990s financial crisis, was still financially weak to contribute to the financing of the FSAI.
The transfer of the banking supervisory role to the FSAI would allow Bank Indonesia to solely concentrate on monetary affairs as stipulated by the central bank law.
On Thursday, following a meeting with Vice President Hamzah Haz, Burhanuddin reiterated there was no urgency to set up the FSAI, saying that the condition was untimely.
The impetus to set up the FSAI came amid increasing challenges facing the financial services industry in the fast-changing global economy.
The establishment of the FSAI is also important because of the deep-rooted conglomeratic practice in Indonesia, as is evident in the cross-ownership between the financial service industry and the real sector.
The late-1990s banking crisis has been partly attributed to an abuse of power by bankers, who transferred depositors' money to affiliated business groups without proper assessments.
"It would be more effective if the supervision of the financial sector is under a single institution," said an industry expert.
"The essence of the FSAI is that it promises better and integrated supervision. So, for the insurance industry, any agency that can help the industry grow is good," Angger Yuwono, chairman of the Association of Indonesian Life Insurance Companies (AAJI) told The Jakarta Post.
However, Angger stressed that the FSAI should be well-prepared in its concept, operation and organization, as it will have a profound impact on the financial services industry.
"Because once the damage done, it will be hard to undo," he said.