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20 January 2012
In October 2011 Parliament finally passed the Bill on the Financial Services Authority. The long-awaited law is one of the most important in Indonesian history and will change the landscape of the country's financial industry. Its 71 articles not only establish a new financial services authority - to be called Otoritas Jasa Keuangan - but also position this new body as the main regulator and supervisor of Indonesia's financial sector.
Articles 4 to 9 of the bill stipulate the vesting of broad power and authority in the new regulator. Article 5, for instance, stipulates that the authority's function incorporates the establishment and operation of an integrated regulatory and supervisory system for all activities across the financial services sector. Its scope of authority covers not only banking, securities and insurance, pension funds and the activities of financing institutions, but also other financial services activities provided by pawnbroking, guarantee, export financing, secondary mortgage and social security institutions.
The new authority's overall task is to ensure that the financial services industry is managed in a way that improves its transparency and accountability, providing greater protection for consumers and the public.
The authority will have a board of commissioners comprised of seven members who are in charge of the specific sectors. They will also have responsibility for audits, education, consumer protection and matters of ethical conduct. The board will also include an ex officio representative from both Bank Indonesia and the Ministry of Finance. These members are to be selected by Parliament from nominees proposed by the president, according to a procedure set out in the new bill.
Consumer protection receives special attention in the bill. Article 30 empowers the authority to:
The authority's relations with other government agencies that handle banking and monetary matters (ie, Bank Indonesia and the Deposit Insurance Corporation) is covered in Articles 39 to 46. There will also be a Financial Stability Coordinating Forum, which will include the minister of finance and the governor of Bank Indonesia among its members.
The enactment of the law will ultimately terminate the power and authority of the existing regulatory and supervisory agencies. As of December 31 2012 the new authority will assume control of the regulation and supervision of all financial services institutions, including the financial and capital markets institutions that are regulated by the Capital Market and Financial Institution Supervisory Agency. The new authority will replace Bank Indonesia as the banking industry's regulator and supervisor on December 31 2013.
The bill stipulates the transfer to the new authority of the tasks and authority of:
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