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Refining OJK independence in the financial sector bill
The PPSK bill appears to place more power with the chair of the board, as he or she will have the final say in the OJK’s board of commissioners’ decision-making process.
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Oversight body: The Financial Services Authority (OJK) building in Jakarta is pictured in this undated photo. (Kontan/Baihaki)
T
he majority of parties in the House of Representatives have approved a draft of the financial sector development and strengthening (PPSK) bill for discussion. Now, the House and the government are delving into deliberation on the draft and consulting with the public on it.
The bill, if passed into law, would be a game changer, as it would amend five of the most important existing financial laws in Indonesia, namely the Financial System Crisis Prevention and Handling Law, the Deposit Insurance Agency Law, the Financial Services Authority (OJK) Law, the Bank Indonesia (BI) Law and the Currency Law.
Given its importance, we are hopeful that both the House and the executive can learn from what the Constitutional Court has laid out in its decision on the Job Creation Law, which adopted the omnibus mechanism, as is also the case in the PPSK bill. One of the lessons of the decision on the Job Creation Law concerns the necessity of meaningful public participation in the law-making process. In this spirit, we have several critical notes with respect to the PPSK bill, particularly on the proposed amendments to the OJK Law.
First, we question the legal foundation of the OJK’s establishment.
The Constitutional Court in its 2015 decision on the judicial review of the OJK Law opined that the establishment of OJK as an independent body was the order of Article 34 of the BI Law. The article says that the task of supervising banks is to be carried out by an independent financial services sector supervisory agency to be established by law.
Unlike BI whose establishment is mandated by the Constitution, the OJK’s establishment is mandated by the BI Law. Consequently, lawmakers could only dissolve Bank Indonesia by amending the Constitution, while that is not the case for the OJK. As the OJK’s foundation is in the BI law, the lawmakers could dissolve or change its status simply by amending the BI Law.
The draft PPSK bill apparently removes the OJK’s legal foundation, as it deletes Article 34 of the BI Law.
