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RI holds financial 'crisis simulation'
The government Friday held what it called a "crisis simulation" exercise to improve coordination between relevant parties when facing a financial crisis, despite the refusal by lawmakers to endorse the government proposal to set up a financial safety net
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The government Friday held what it called a "crisis simulation" exercise to improve coordination between relevant parties when facing a financial crisis, despite the refusal by lawmakers to endorse the government proposal to set up a financial safety net.
On Thursday, the House plenary session rejected the proposed regulation-in-lieu-of-law on a financial safety net (JPSK) as according to lawmakers this might give to government a "superior" power, leading to a "moral hazard".
But this did not prevent government from carrying out the simulation.
The exercise -- with the participation of the Finance Ministry, the central bank and the Deposit Insurance Corporation (LPS) -- was part of a crisis management scenario, to test their readiness to safeguard the financial sector, Finance Minister Sri Mulyani Indrawati said in a press conference.
"Today's simulation will be a lesson to fix some flaws, while perfecting the (in-lieu-of-law on the financial system safety net) JPSK regulation. Information sharing is what needs to be improved the most," she said.
"Between Bank Indonesia (BI), LPS and the government, there is a gap that can lead to lack of coordination. BI, LPS and the government should be in unity when facing a crisis," she said.
She added that Indonesia was the first country in Asia to conduct such a simulation.
Mulyani said Indonesia's biggest threats that could cause possible crises in the financial sector were external factors, such as a decline in commodity prices and exports demand, both of which might reduce the debt repayment capacity of firms, or could trigger a rise in bad loans that could damage the banking sector.
The minister was responding to the House of Representatives' recent rejection, which means that the government will have to draft and submit new proposals on the JPSK.
Mulyani said the government would not make significant changes to the new JPSK bill, which should be submitted to the House at the latest by Jan. 19, but "will include lawmakers' opinions".
"The regulation-in-lieu-of-law (on JPSK) will be a basis (for the bill). But we will include some relevant opinions from lawmakers, which we did not think of when drafting the proposed law," she said.
Lawmakers said they wanted the government to change several articles in the proposed law so that the government's authority would not be "too excessive".
The articles referred to included the government's immunity if it makes a wrong decision, the finance minister's leadership position in the Financial System Stability Committee (KSSK) and role in determining when a crisis might be deemed to exist.
Danareksa Research Institute chief researcher Purbaya Yudhi Sadewa said the existing regulations should be adequate to protect the financial sector. "The government has been able to safeguard banks all this time. What is the urgency to make the JPSK law?"
The BI law, he said, stipulated the government could inject funds to BI if its balance plunged to negative. "It means that BI can inject funds to ailing banks, with the government's (liquidity) support, even without the JPSK law."
