'Supervisory body to boost BI's accountability'

'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.