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Jakarta Post

Experts warn of moral hazard, uncertainty as House plans to let BI supervises banks

  • Adrian Wail Akhlas and Riska Rahman

    The Jakarta Post

Jakarta   /   Mon, September 7, 2020   /  07:26 am
The Jakarta Post Image
A man walks past the Financial Services Authority (OJK) building in Central Jakarta on May 15, 2013.(Tribunnews/Herudin)

The House of Representatives' proposal to bring back banking supervision to Bank Indonesia (BI) has drawn criticism as experts warn of possible moral hazard and regulatory uncertainty. In a draft revision of the 1999 and 2004 BI laws, the House's Legislative Body (Baleg) proposed that the central bank take over the job of supervising banks from the Financial Services Authority (OJK). The gradual takeover process is expected to be completed by Dec. 31, 2023, at the latest. The OJK was established in 2011 to oversee the financial industry and it was modeled on the financial services regulatory structure that prevailed in the United Kingdom. It assumed the role of regulator and supervisor of banks in 2013, taking the responsibility from the central bank. The plan to return the role to the central bank will put the credibility of lawmakers and the government at stake, said U...