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 University of Indonesia (UI) economist Fithra Faisal, adding that the bill would result in a “policy flip-flop”.

“The current regulation exists because back then, the central bank was considered overwhelmed with its many policy objectives,” he told The Jakarta Post on Tuesday. “If the government and the House want to be fair, the OJK must be given time and more resources to function properly.”

The proposal came after media reports emerged in July saying President Joko “Jokowi” Widodo was considering issuing an emergency decree to return the banking regulation to the central bank over his dissatisfaction with the OJK’s performance during the pandemic.

Critics claimed the OJK was performing poorly in supervising the country’s financial system as shown by a string of defaults in several insurers and asset management companies. The Supreme Audit Agency (BPK) recently warned the OJK over what it called the inadequate supervision of eight banks, including Bank Bukopin, which currently faces liquidity issues.

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