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.