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View all search resultsOJK’s dual mandate is the problem, credibility is key
To restore Indonesia’s market credibility, the OJK must stop trying to be both a cheerleader and a policeman, because a regulator tasked with protecting growth will always be too conflicted to enforce the law.
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Financial Services Authority (OJK) acting head Friderica Widyasari Dewi (fourth right), and another newly appointed OJK leader, Hasan Fawzi (third right), brief the press after taking on their new roles on Jan. 31, a day after previous leaders announced their resignations. Jeffrey Hendrik (second from right), meanwhile, is expected to assume ad-interim the role of Indonesia Stock Exchange (IDX) president director. (The Jakarta Post/Ni Made Tasyarani)
W
hen the Financial Services Authority (OJK) was established nearly 15 years ago, the priority was clear: decoupling banking supervision from the central bank and consolidating it with capital market and non-bank financial institution oversight.
The shift was driven by the belief that modern financial firms were moving toward universal services, where banking, insurance and capital market activities increasingly overlapped. A unified regulator was expected to strengthen supervision by allowing insights from one sector to inform oversight in another.
At the time, this institutional consolidation made sense. In practice, however, the outcome has fallen short of the ambition. Over time, each supervisory unit within the OJK has tended to operate in its own silo, with limited cross-sector pollination of ideas.
The original vision, that knowledge gained from one segment would fortify another, has not fully materialized. More critically, in the area of enforcement, the OJK has appeared constrained by its simultaneous mandate to ensure both the development and the stability of the financial sector.
The OJK’s legal mandate is broad. It must ensure proper conduct, provide consumer protection and support sustained financial growth. At first glance, these objectives seem aligned: proper conduct fosters stability, protected consumers increase participation and growth follows naturally.
But in practice, these goals often collide. Whenever unusual market behavior emerges, typically an early sign of misconduct, the instinct has been to proceed with extreme caution. Discreet inquiries are conducted while markets continue functioning uninterrupted.
The concern is understandable: halting trading in a specific instrument or suspending a firm under suspicion could "spook" investors. A localized disruption might spill over into broader market sentiment, affecting trading across the board.
