'Supervisory body to boost BI's accountability'

The Jakarta Post, Jakarta

Minister of Finance Boediono stressed on Monday the importance of setting up a supervisory board for Bank Indonesia's board of governors in a bid to strike a balance between the central bank's independence and its accountability.

The existence of such a board was to accommodate criticism from other parties, so in a way this would also strengthen the central bank, Boediono said.

"It's not intended to weaken BI; the establishment of the board is meant to strengthen it, so it can be a buffer whenever criticism is directed toward the central bank," he said on the sidelines of seminar on the economy here, adding that the board would not interfere with BI monetary policies.

The supervisory board in question was the one that had been proposed by the ministry to be included in the amendments to the current Bank Indonesia law.

The central bank has opposed this proposal, causing further delays in the amendment of Law No. 23/1999 on Bank Indonesia.

Under the government's proposal, the supervisory board would focus on setting up a control mechanism to supervise and monitor the performance of the BI board of governors, meaning that it would deal with their accountability.

The proposal aims to improve the accountability of the board of governors, which, under the existing law, is almost untouchable. Members of the board may be replaced for only one of three reasons: resignation, incapacity or expiration of tenure.

However, despite fierce opposition from the central bank, Boediono was upbeat that the matter would soon be resolved.

"There are still, indeed, differences over the supervisory body, but I expect an understanding can soon be achieved," he said.

Another unresolved issue, according to Boediono, was the planned establishment of a financial services authority.

Such an institution would take over the role of Bank Indonesia in supervising the banking sector -- something that many have viewed as the underlying reason behind the central bank's reluctance to accept the concept.

Bank Indonesia has requested the plan be postponed by at least 5 years.

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 corporations managing public funds.