Muliaman named to lead financial ‘superbody’

JAKARTA. Seven familiar figures from Indonesia’s financial system have been selected to lead the nation’s first ever Financial Services Authority (OJK), which will oversee thousands of trillions of rupiah of people’s funds with banks, insurers, capital markets and other financiers.

The House of Representatives’ Commission XI overseeing banking and finance unanimously picked on Tuesday Bank Indonesia (BI) deputy governor Muliaman Hadad, a career central bank official since 1986, to be the chairman of the OJK’s nine-member board of commissioners.

“As deputy governor for BI for six years, Muliaman knows all about being a regulator,” said Tony Prasetiantono, director of Gadjah Mada University’s (UGM) Center of Economic and Public Policy Research.

That should ease the transition process, as the OJK will remove the banking supervisory function from BI and also supervision of the capital market and non-banking financial institutions from the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK).

“The OJK project is so risky. It must be run by the best financial regulators and administrators in the country,” said Fauzi Ichsan, a senior economist at Standard Chartered Bank Indonesia.

“The challenges are enormous,” Fauzi added, citing logistics, staffing, harmonization of salaries, coordination between various stakeholders — BI, the Finance Ministry, Bapepam, the banking sector and the capital market. “Then, they need to work out legal issues and protocols if, in its infancy, the OJK faces a severe global economic crisis.”

The OJK is expected to sharpen supervision over Indonesia’s financial system to lend it better protection from external shocks and also from the many fraud cases that have emerged in the country.

“We can only hope that the House chooses the OJK commissioners based on professionalism, and not on politics.”

The commission members did not choose a deputy for Muliaman; neither did they choose the executive heads for banking, capital market, non-bank financial institutions, or chairpersons for auditing, consumer education and protection; but instead, they appointed six people as members of the OJK board of commissioners.

Concerns over the OJK candidates has emerged as most of them already hold positions at government institutions, with Indonesia Corruption Watch (ICW) fearing that overt links with the Finance Ministry, BI and state-owned Bank Mandiri dominating the candidates could disrupt the OJK’s independence.

The six OJK board members chosen by the House include BI director for international affairs, Nelson Tampubolon; Bapepam-LK’s chairwoman, Nurhaida; and the Finance Ministry’s director general for debt management, Rahmat Waluyanto.

The others are Indonesia Deposit Insurance Corporation (LPS) commissioner Firdaus Djaelani; Padjadjaran University professor Ilya Avianti; and former BI director for human resources, Kusumaningtuti Sandriharmy.

The remaining two positions will be filled by officials from BI and Bapepam-LK.

The financial oversight body is required by law to begin its capital market and non-banking financial institutions monitoring function at the beginning of next year, while its banking supervisory functions will be fully operational by the start of 2014. (Hans David Tampubolon and Esther Samboh/ The Jakarta Post)