Govt to merge Bapepam, Ministry of Finance unit

Rendi A. Witular, The Jakarta Post/Jakarta

The new government plans to merge the Capital Market Supervisory Agency (Bapepam) and the Directorate General of Financial Institutions, as part of attempts to streamline the Ministry of in terms of fiscal affairs and policy making.

Director General of Financial Institution Darmin Nasution said the merger plan was part of a second reorganization at the Ministry of Finance ahead of the establishment of the Financial Service Authority (OJK) in 2010. The latter agency will supervise all bank and non-bank financial institutions.

"Currently, we are still in the process of studying the merger plan. In the future, the ministry will focus more on fiscal affairs and policy making," said Darmin during a ceremony on Saturday.

At present, both the Bapepam, which oversees the capital market, and the Directorate General of Financial Institutions, which supervises non-bank financial institutions, are under the auspices of the Ministry of Finance.

Plan to merge the two institutions is already included in the new government's 100-day economic program.

Darmin said the new institution resulting from the merger was expected to function as a temporary independent agency that would prepare for the establishment of the OJK, and as a temporary supervisory agency for the country's non-bank financial institutions.

According to the central bank law, the powerful OJK should be set up by 2010 at the latest, and will take over the central bank's supervisory role on banks.

The OJK, which will be under the Ministry of Finance, will oversee all financial institutions such as banks, insurance, pension funds, securities houses, and multifinance firms.

The planned merger of Bapepam and the Directorate General of Financial Institutions is also aimed at making supervision of non-bank financial sector more efficient amid the lack of coordination between Bapepam and the Directorate General of Financial Institutions as reflected in a number of issues such as the supervision of accounting firms and insurance companies, both of which have a close link to activities in the capital market.

Legally, Bapepam has no authority to hand out sanctions to accounting firms or insurance companies that are in violation of the capital market regulations, as such authority is with the Directorate General of Financial Institutions.

"We plan to maintain the function, or maybe the name, of the Bapepam after the merger. What we will merge is actually the supervision tasks of both the Bapepam and the Directorate General of Financial Institutions," said Darmin.

Sources at the Ministry of Finance said Darmin was likely to become head of the new agency, while Herwidayatmo, chairman of the Bapepam, has already earned a new post as World Bank executive director representing Southeast Asia.

Herwidayatmo is scheduled to leave his post in Nov. 1, however, Minister of Finance Yusuf Anwar has extended his tenure until Nov. 11 to help prepare the merger.