Indonesia’s banking regulator challenged at court
(27 May 2015 – Indonesia) As levels of bad debt rise in the slowing Indonesian economy, Indonesia’s constitutional court is in the throes of finalising a review into the role of the country’s financial regulator.
The Financial Services Authority, known as the OJK took over as the banking regulatory authority from Indonesia’s central bank in 2011.
The court is finalising a review of a legal challenge appealing against eight articles of the law in a challenge to the definition, authority and fees of the new regulator in a decision that is final and can’t be contested.
Indonesia’s banks want regulation to return to the central bank believing regulation should be closely aligned to monetary policy.
“It’s desirable, as soon as possible, that supervision should go back to Bank Indonesia,” Sigit Pramono, chairman of Indonesia’s National Banks Association, said in an interview with Bloomberg.
“It’s not about the fees, but about readiness when a crisis occurs,” he said.
The plaintiffs bringing the case against the regulator are Indonesia for Global Justice researcher Salamuddin Daeng, and lawyers Ahmad Suryono and Ahmad Irwandi Lubis, according to the case’s legal adviser Syamsudin Slawat Pesilette.
They are looking for either the dismissal of the OJK, the return of banking supervision to Bank Indonesia, or for the OJK’s fees to be paid to the state budget, he said.
The OJK requires banks to pay an annual fee of 0.03 percent of their assets, to pay for operations, Pramono said.
Currently the OJK is pushing for consolidation of local banks, a change in funding sources at lenders and restrictions on foreign ownership at local banks and insurers.
Modelled on the United Kingdom’s financial regulator, OJK also regulates insurers, auto financing companies and the stock exchange.
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