Govt: No Agreement on Financial Service Authority Board of Commission

In the bill of Financial Services Authority proposed by the President, the government suggested that four out of seven members of the Financial Services Authority Board of Commissioners should undergo a fit and proper test conducted by the House of Representatives.

Agus Martowardojo, Finance Minister, said there has been no agreement so far between the government and the House of Representatives regarding the institutional structure of the Financial Service Authority. The government suggested that out of nine members of the board of commissioners, seven will be appointed by the President. Of the seven, four will be subjected to a fit and proper test by the House of Representatives, while three will be directly appointed as executive heads consisting of Bank Indonesia, the Regulatory Agency of Market and Financial Institution and the Finance Ministry. The remaining two members will be chosen by votation and will serve as ex-officio members of Bank Indonesia and the Finance Ministry.

The new proposal came from the government after the discussion regarding the board of commissioners was stalled. In the discussion that ended on December 31, 2010, the government wished to appoint two members in the board of commissioners from the Finance Ministry and Bank Indonesia, while the other five proposed by the government were to undergo the fit and proper test.

The House of Representatives rejected the proposal because if the two members of the board of commissioners come from the central bank and finance ministry, it will diminish the independence of the Financial Service Authority. The parliament recommended that all members must go through the fit and proper test.

According to Agus, the government wishes to put ex-officio members in the board of commissioners to bridge Bank Indonesia and the Financial Service Authority to supervise and manage the financial sector and, at the same time, monitor the current economy.

He added that the parliament’s concern regarding the issue of independence is absurd because the membership proportion of the ex officio is really small. Should the board of commissioners use votes to reach a decision, the two members will not be able to have majority votes.

The parliament suggested for the five candidates proposed by the government to join the fit and proper test, with the minimum of two candidates for one position. Two members will be directly appointed by the parliament and assigned as a member of the board of commissioners, while two others will be ex officio members from Bank Indonesia and the finance ministry. They will also receive a direct assignment to be members of the board.

Pande Radja Silalahi, Chief of the Economist of Centre for Strategic and International Studies, said that membership to the board of commissioners is not a matter of distributing position, but it is also a matter of appointing the right people in the Financial Service Authority.

Pande said that the Financial Service Authority should serve only as an investigator not a prosecutor according to the original purpose of establishing the institution.

Extended Period

The discussion of the bill of law of the Financial Service Authority previously scheduled to end by June 10, 2011 is proposed to be extended to July 15, 2011. If the discussion is not finished by then, the bill will be returned to the government and article 34 of the Bank Indonesia Act will be amended.

Nusron Wahid, Chairman of the Working Committee of the Financial Services Authority Bill, said that the House of Representatives has sent letter to the working committee requesting them to end the discussion by end of May.

Nusron said that due to the tight deadline, based on the joint decision of the working committee, the Chairperson of the House of Representatives will be asked to extend the deadline until July 15, 2011, the end of the current session, despite the target to finalize the bill by June 10, 2011.

The government expects the bill to be finalized as soon as possible, because the delay will halt the process of decision making. “The example would be the case of Bank Century’s bailout which has become controversial. The bill is expected to become a law soon to prevent the overlapping authority of the central bank in managing the banking sector,” he said.