M

embers of the House of Representatives have finally agreed not to deliberate the long-awaited bill on the financial system safety net (JPSK) because a government regulation in lieu of law (Perppu) on the JPSK is still in place.

Arif Budimanta '€” an Indonesian Democratic Party of Struggle (PDI-P) politician and former member of House Commission XI overseeing finance and banking '€” said that the commission had held discussions with several experts about the planned deliberation of the government-sponsored bill.

'€œAccording to the experts, the Perppu must first be revoked in order for the process to proceed,'€ he said during a speech to fewer than 30 House members attending a plenary session late on Monday, just a day before the effective end of the legislators'€™ term.

The Perppu was issued in October 2008 at a time when the global economy was suffering from a financial crisis. It contains measures on crisis prevention and management to maintain stability in the financial system, including mechanisms on the lender of last resort policy.

The government'€™s efforts to bring the bill into law have repeatedly failed, largely because of lawmakers'€™ claims that certain points in the bill would provide immunity for policymakers when making decisions in the future.

Lawmakers said that the new government might resume the process during the 2014-2019 term, provided that the Perppu was first scrapped. However, issuance of another law is required as the legal basis of a revocation of a Perppu.

Following the decision on the JPSK bill, officials at Bank Indonesia (BI) and the Financial Services Authority (OJK) once again emphasized the importance of the law.

According to BI Senior Deputy Governor Mirza Adityaswara, the JPSK law is indispensable because of the boom-and-bust nature of all economies. '€œMechanisms to withstand shocks in the financial sector are needed. If unattended, such shocks will have a direct impact on the retail sector,'€ Mirza said.

He added that the new government and the new lawmakers would start discussions anew, but argued that immunity was not the main feature of the JPSK. '€œThe important thing is to provide confidence for those managing any crisis,'€ he said.

OJK commissioner on banking supervision Nelson Tampubolon voiced a similar opinion to Mirza, describing the issuance of the law as '€œcrucial'€.

At the same time, lawmakers agreed to ditch discussions on the draft of a banking bill in the plenary session. The draft was prepared by Commission XI, but was not finalized as a bill because of time constraints.

The draft had provoked controversy for proposing a cap on foreign ownership and the requirement for a foreign bank'€™s branch to be locally incorporated.

As previously reported, lawmakers sought to limit foreign ownership of a bank to a maximum of 40 percent, jeopardizing existing foreign shares for a number of Indonesian lenders.

 '€œIt will be up to the next administration whether or not it wants to pursue the matter, but the process must start from scratch,'€ Arif said.

Commenting on the development, Joseph Abraham, Bank ANZ Indonesia president director and Foreign Banks Association of Indonesia (FBAI) chairman, said that all international or foreign banks would follow the rules in every country, including Indonesia.

Standard Chartered Bank Indonesia managing director Fauzi Ichsan, meanwhile, said that the end of discussions on the draft was a breath of fresh air for foreign banks.