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Candidates share concern on bank supervision

Three candidates contending for the position of Deputy Governor of Bank Indonesia (BI) have all stressed the need for BI to improve banking supervision to ensure stability in the financial system

Aditya Suharmoko (The Jakarta Post)
Jakarta
Tue, March 30, 2010

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Candidates share concern on bank supervision

T

hree candidates contending for the position of Deputy Governor of Bank Indonesia (BI) have all stressed the need for BI to improve banking supervision to ensure stability in the financial system.

The three candidates are Halim Alamsyah, director of banking research and regulation at BI; Perry Warjiyo, director of monetary policy research at BI; and Krisna Wijaya, a commissioner at Bank Danamon, who is the only non-BI candidate.

They presented their views Monday at the BI to reporters and BI employees, with a view to  one of them replacing Deputy Governor Siti Fadjrijah who will end her term in May. The House of Representatives is scheduled to hold a selection test for the candidates in April.

Halim said a strong financial system is very important to ensure stable economic conditions. “The existing paradigm is that monetary policies are everything. I say, monetary policies are not enough to guarantee financial system stability,” he said, citing the recent global crisis.

Critics have blamed BI for its failure to detect fraud on the part of the owners of Bank Century (now renamed Bank Mutiara), which cost the Deposit Insurance Corporation Rp 6.76 trillion (US$716 million) in bailout funds in November 2008.

Perry said banking supervision should be strengthened. “Good banks should be maintained, banks that don’t deserve to continue should be closed. Law enforcement is important. The urgent thing is that banking supervision should be immediately improved,” he said.

“The central bank can’t manage monetary policies well without stability in the financial system. Monetary and financial policies are two interrelated aspects,” Perry said.

Krisna said banking supervision should be different for each bank. “Each bank has its own characteristic. If they’re treated the same, it’s not equal. A bank’s management and supervisor should also be scrutinized,” he said.

The three candidates talked about how the establishment of a Financial Services Authority (OJK) would impact on the financial system.

“In my opinion the OJK is a blueprint of Indonesia’s financial sector. The rate of financial deepening in Indonesia is the lowest in ASEAN, even compared to Vietnam. It shows that we have many banks, but they haven’t penetrated the economy. If we want the real sector to improve, the financial sector should be improved,” Halim said.

Perry said in establishing the OJK, the government and BI should consider that monetary and financial policies should not be separated. “Regulatory aspects should stay at BI, micro and prudential supervision aspects can be at the OJK,” he said.

But Krisna said that the OJK is a “major alternative” for banking supervision. “I just see what the stakeholders want from supervisors. I think it’s a major alternative,” he said.

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