Govt to merge Bapepam, Ministry of Finance unit

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.