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| Freddy Karyadi | Oene Marseille |
On October 27 2011, the Indonesian parliament passed the Financial Services Authority or Otoritas Jasa Keuangan Law which establishes a new government agency known as the OJK. The purpose of establishing the OJK is (i) to ensure that the financial services sector is orderly, fair, transparent and accountable; (ii) to create a sustainable and stable economy; and (iii) to protect the consumer and public interest.
To fulfil its purposes, OJK has the authority and obligation to regulate and supervise activities in the financial sector. This was previously carried out by Bank Indonesia, the Capital Market and Financial Institutions Supervisory Agency (known as Bapepam-LK), the Ministry of Finance, and Indonesia Deposit Insurance (or LPS).
The OJK is to regulate and supervise banking, financial market, insurance and re-insurance, pension fund, financing and other types of financial service institutions. Its activities will be performed with the cooperation of, and in coordination with, Bank Indonesia and Indonesia Deposit Insurance Corporation.
Specifically, the OJK has the authority to issue an approval to establish a bank and supervise all banking activities, including banks’ financial health and the implementation of prudent banking principles. The OJK is also authorised to impose sanctions on parties in the financial sector.
The OJK’s top authority is the Board of Commissioners, which will have nine members, each having different tasks. Further, the OJK Law also creates a coordination forum on financial systems, which consists of the minister of finance as coordinator, the governor of Bank Indonesia, the chairman of the Board of Commissioners of the OJK, and the chairman of the LPS. In this forum, the OJK is required to monitor and evaluate the stability of the financial system and communicate its findings to other institutions.
The OJK Law will come into force by November 27 2011. On December 31 2012, the functions and authorities of the Ministry of Finance carried out by Bapepam-LK will be transferred to the OJK. Bank Indonesia’s authority over the banking industry will be transferred on December 31 2013.
Oene Marseille and Freddy Karyadi