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op executives at several local banks agree that the Financial Services Authority’s (OJK) proposed fee-collection scheme is burdensome and incorrectly targets larger and more efficient banks.

“We hope that the OJK’s fees can still be evaluated so as not to be that expensive,” Bank Mandiri president director Zulkifli Zaini said on Friday.

The fees, which will be based on a bank’s assets, would drive up Bank Mandiri’s costs, he added. Zulkifli suggested that the financial watchdog consider a risk-based scheme, where banks with better governance and risk management would pay reduced fees, or a tax-deductible scheme, where fees paid to the OJK would reduce a bank’s tax obligation.

The OJK, a financial institution that will take over Bank Indonesia’s (BI) banking supervisory role in 2014, introduced a new fee-collection scheme on Thursday.

Under its proposal, all commercial and rural banks would pay 0.06 percent of their total assets each year to support the institution’s activities. Other financial institutions, including insurance firms and pawnshops, such as PT Pegadaian, would also be subject to the proposal.

If the proposal comes into force, the OJK will start collecting the fee during a transition period in 2013, when banks will be required to pay half of their full obligation, or 0.03 percent.

The fees will increase to 0.045 percent in 2014 and ultimately to 0.06 percent by 2016.

This means that institutions such as Bank Mandiri, the nation’s largest lender with assets of Rp 588 trillion (US$61.05 billion), will be obliged to pay Rp 350 billion (US$36.3 million) every year starting in 2016. “We hope that the percentage could be reduced for banks with sizable assets,” noted Zulkifli.

Bank Negara Indonesia (BNI) president director Gatot M. Suwondo shared a similar view, saying that imposing high fees would hinder the central bank’s campaign to boost banking efficiency in Indonesia, which currently has the highest banking costs compared to other countries in the region.

Gatot referred to a report from BI that said that Indonesian commercial banks had an average cost-to-income ratio (BOPO) of 74.26 percent as of September, while the ratio for other Southeast Asia nations ranged from 40 to 60 percent.

“A while ago BI criticized the banking industry for having high costs and being inefficient. But this [proposal] will drive up our costs, forcing us to think harder on how to increase our bottom line net profit,” Gatot said.

The OJK Law stipulates that the authority must collect fees from banks to finance its operations to become independent and reduce its reliance on state funds in the long-run.

In October, Muliaman Hadad, the OJK chairman, requested that the House of Representatives earmark Rp 1.69 trillion (US$175 million) in the 2013 state budget to finance the OJK next year.

Analysts have criticized the plan for banks to funds the OJK’s operations, claiming that collecting fees from financial institutions would impinge the independence of the OJK in doing its job of supervision and monitoring.

“Previously, BI never collected any fees [from banks]. If the OJK is financed by banks, it is not right under good corporate governance principles. I’m afraid that there will be a conflict of interest here,” Raden Pardede, a banking expert with Creco Consulting, said on Wednesday. (sat)