New financial authority planned

New financial authority planned

The Jakarta Post, Jakarta

The government expects to establish a powerful new financial
services supervisory institution (LOJK) next year, with the draft
law as a legal basis for the institution to be approved by the
House of Representatives later this year.

Finance Minister Boediono said on Wednesday that the
institution would be in full operation by 2004.

The institution will take over the role of Bank Indonesia (BI)
in supervising banks and that of the capital market watchdog
Bapepam in overseeing the country's capital market.

Apart from supervising the banking sector, the institution
would also oversee other service-based financial industries such
as insurance, pension funds, securities, and other institutions
or corporate management of public funds.

With such a broad range of coverage and a clear job
description, a span of authority would be a crucial component for
the draft bill to avoid misperception and overlapping
regulations.

In response, Boediono said that the government has been
working comprehensively to prepare them, including seeking input
from the public by holding seminars and meetings with experts.

"Job description is one crucial point; we'll look into it
carefully.

"But in principle, in supervising banks for instance, as far
as macro-monetary policy is concerned, Bank Indonesia is still in
charge," he told reporters during a break from a government-
initiated seminar on financial service authority.

The idea is to set up such an institution came amid increasing
challenges in financial service industries, as the industry is
facing more and more complex problems in the ever-changing global
economy.

According to Darmin Nasution, the director-general for the
financial institution who also heads a team formulating the draft
bill, there is a variety of reasons why Indonesia needs such an
institution.

These include more complex cross-border financial
transactions, more sophisticated financial products and business
operations, along with rapid technology innovation.

All these, Darmin said, only lead to the need for the
government to increase the level of protection to consumers.

He said that one of the functions of the LOJK would be to help
curb financial crime in the country.