Transcript Financial Services Authority

Financial Services Authority
(Otoritas Jasa Keuangan-OJK)
Drs. Paripurna Sugarda
PHBK UGM
November 7, 2002
Background
 Similarity among financial service industries;
bank, capital market, insurance, pension
fund, and others as intermediary entity.
 The existence of financial conglomerate
whereby bank only function as facility of
other financial products provider.
Objective
 To maintain the growth of sound,
competitive, stable, efficient, secure and fair
financial services industry (Art. 7 Draft Law).
Duties (Art. 8 Draft Law)
 To increase and maintain public confidence
in financial services sector.
 To enforce the regulation of financial
services sector.
 To increase public awareness on financial
services sector.
 To protect financial services consumer
interest.
 To decrease the level of financial crime.
Current Financial System
Structure
Gov. (MOF)
Central Bank
Macro Prudential
Regulation
-monetary stability
-financial stability
Micro Prudential
regulation
Licensing, regulation, and
banking supervision
Banking
Non Banking Financial Institution
Capital Market
Format of Financial System
Structure
Central
Bank
OJK
LPS
(Deposit Insurance Co.)
Gov.
Micro Prudential
regulation
Macro Prudential
Regulation
-monetary stability
-financial stability
Banking
Licensing, regulation,
and
Supervision of
Financial Inst. And
Capital. Market
Non Banking Finc. Inst.
Capital Market
Prerequisite of Success
 Good preparation and implemented instages.
 Coordination with interrelated institution.
 Maintaining independency, integrity, and
professionalism to avoid conflict of interest.
 Amendment of supervisory institutions of
financial institution regulation(Central Bank,
Bapepam/SEC).
Prerequisite of Success
(continuation)
 Determining the institution function as lender
of the last resort.
 Determining monitoring system and
parameter of OJK’s performance.
Positive Impacts on Banking
 Synergy in the supervision of financial service
products.
 The existence of a ‘problem solving’ mechanism
for the banking sector in one institution.
 Report delivery only to one institution.
Negative Impacts on Banking
 During the transition era, overlapping supervision
between the OJK and the central bank will
potentially occur.
 The transferring of the supervisory function from
the Central Bank to the OJK can bring about
instability, since the condition of the national
banking sector is still susceptible.
 The plan to account for the OJK to the President is
potential to lessen the independency
 Public trust to the national banking will decrease.
The Pro’s to OJK
 Simplify the institutional supervisory format
 Potential of ‘economies of scale’
 Lessen the inconsistency and duplication of
regulation & supervision
 Decrease ‘conflict of interest’
 A clear accountability
The Con’s of OJK
 Will become a big institution so that it will
get very bureaucratic
 Too powerful and too political, especially
since it supervises all financial institutions
 Internationally it hasn’t been proved to be
more
effectively
and
efficiently
in
supervising
International Portrait
To Supervise/By:
 Only Banks
The
The
Total
Central NonAmount
Bank
Central
Bank
46
6
52
 Banks + securities
6
4
10
 Banks + insurances
1
5
6
 Banks + securities +
insurances
 Total Amount
1
6
7
54
21
75
International Portrait (continuation)
• Until now there hasn’t been any agreement
reached about the final institutional format
• Format will be determined by ‘country specific’
• In the implementation, a ‘coordination culture’ is
needed, and the intensely happened is the difficulty
to combine the banking and non-banking culture.
The Implementation of OJK
The Commissioner Board:
 1 person as a Head of Commissioner, and 6
persons as members. One of the members will be
appointed as Head of Executive
 Appointment and dismissal will be done by the
President with the approval of the DPR (the
Indonesian Legislative Assembly)
The Implementation of OJK
(continuation)
Board of Commissioner in the Transition Era
o Total number: 3 persons
- 1 person as a Head of Board of Commissioners
- 1 person as Head of Executive
- 1 person as a member
o 2 persons are proposed by the Minister of Finance, and 1 Governor
Deputy who is appointed by the Governor of the Central Bank
o Period of Function;
- 1 person appointed by the Minister of Finance: 5 years
- 1 person appointed by the Minister of Finance: 4 years
- 1 person appointed by the Governor of the Central Bank: as long as
he/she functions as a member of the Board of Governors.
Action Plan and Budget
Validated by the President, at the latest 1 (one) month
before the fiscal year starts.

 OJK announces its revenues and expenses budget through
mass media 3 (three) months before the fiscal year to get
public responses
 OJK determines the revenue and expenses budget 2 (two)
months) before the end of fiscal year
Action Plan and Budget
(continuation)
 OJK’s revenue: periodical cost, service/activities expenses,
and penalty expenses, interest or other financial sanctions
to OJK.
 Budget Surplus:
<(Periodical cost + cost on services/OJK activities) –
(expenses + unused reserves)> paid to the government as
Non Tax Revenue.
 Budget Deficit:
Revenue deficit compared with the OJK expenses fulfilled
by the government through the Minister of Finance
Bookkeeping and Reporting
Bookkeeping and Reporting Principles:
1. Fiscal year
Calendar Year
2. Annual Report
to the President and its
summary is announced to public through the mass
media
3. Accountability of Report
independent auditor
audited by
SUPERVISION
COVERAGE OF SUPERVISION
1. Financial Service Institution
2. Prudential Financial Service Institution
3. Controller
4. Affiliated Parties
THE CAPITAL
MARKET INDUSTRY
IN THE OJK
SELF REGULATORY ORGANIZATIONS
Prudential Financial Service Institution
SRO is included in the category of Prudential
Financial Service Institution, since it has:
 to collect public’s fund
 a long term responsibility
 a potential to cause operational and financial
failure to other financial service sector.
SELF REGULATORY ORGANIZATIONS
(continuation)
CONTROLLING
The regulation of the Controlling of SRO uses the ‘fit
and proper test’ mechanism, and needs the OJK
approval toward the transfer and usage of the voting
rights
SECURITIES COMPANIES
Different with SRO, Securities Company is a
Non-Prudential Financial Service Institution,
except securities company that operates as
an Investment Manager
ISSUER OR PUBLIC COMPANY
Regulation toward issuers or public companies is
divided in two categories;
 Prudential financial service institution for issuers
or public companies who operate in banking areas,
life insurance, general insurance, and reinsurance
 Non-Prudential financial service institution for
issuers or public companies who operates in areas
not mentioned above
CAPITAL MARKET SUPPORTING
PROFESSION
Capital Market Supporting Profession included
in the category of the Non-Prudential Financial
Service Institution that has the obligation to
get permission, registration, or approval from
the OJK
IMPACTS
ON BAPEPAM
IMPORTANT FACTORS
1. Accountability
2. Decisions and Policies Direction of Capital
Market
3. Focus
4. Quasi Judicial Authority
5. Human Resource and Public Awareness
6. Equality of Institutions
1. Accountability
 Annual Report/Activities as institution’s
accountability standard
 OJK is a supervising institution for a number
of industrial sectors
 Each sectoral is obligated to keep its
accountability so that it doesn’t cause difficulties
for the overall OJK’s accountability
2. Decisions and Policies Direction of
Capital Market
• The process of decision making is something that
we must pay attention so that it doesn’t lessen the
speed of decision making
• Coordination in decision making carried out by the
leaders with various professional backgrounds must
not blur the direction of the capital market industrial
policy.
3. Focus
 The increasing supervising activities due
to the broad industry that must be
supervised
 The accuracy of decision making is an
important factor because of the various
characteristics of the object/institutions
that must be supervised
(the possibility of ‘conflict of interest’)
4. Quasi Judicial Authority
 The authority to dismiss a legal process toward a
criminal act with many considerations, especially
consideration that is related with the relevant
industrial development
 All institutions in the OJK (except the Bapepam) are
obligated for having that authority
5. Human Resource and
Public Awareness
Based on other countries’ experiences, it
needs plenty adequate of hard work and time
in order to prepare human resource and
public/industry awareness
6. Equality of Institutions
The object/industry supervised is relatively
broader than other industry, because:
 Capital Market is an integration between
many activities that involved many people
 The supervision coverage at least consist of
5 major items, i.e., supervision toward SRO,
securities companies, institutions and
supporting profession, issuers and public
companies, and law enforcement