OJK Really wants to Retain Oversight Role of Indonesian Banks

The Financial Services Authority, or OJK, insisted on Wednesday that it will retain an integral role to supervise and regulate Indonesian finance institutions, amid ongoing attempts by lawmakers to come back the duty to the central bank.

Renowned financial market analyst Ryan Kiryanto, currently hired by the OJK as lead analyst, argued that the rapid development in financial markets and the complex challenges to keep carefully the highly dynamic businesses within regulations require an “integrated oversight system” which includes been applied by the OJK since its establishment.

"If we had a flashback to the past financial crises in 1998 and 2008, we would need a built-in regulatory entity to oversee financial markets, an oversight body like the OJK today,” Ryan said in a statement published by the OJK.

“[Integrated oversight system] has become the OJK’s flagship. Because of it, the overall economic climate happens to be well-guarded and solid,” he said.

The OJK has been trusted as an oversight body of Indonesian banks since 2013, overtaking the role from Bank Indonesia.

Ryan said the agency wouldn't normally interfere in the ongoing discussions at the House of Representatives on the likelihood of returning the oversight role to the central bank, indicating the OJK has no control over it. 

"It’s the political domain so we can not become involved,” he said.

Ryan said further the dynamic in financial industry has generated overlapping business units that require new approaches in regulations. For instance, insurance products are being marketed through banks that produce customers think they classify as bank products.

"Things like this must be closely watched to ensure that problems could be detected early and preventive measures could be taken in the proper time before they become a wide-scale crisis,” Ryan said.

"The 1997-98 financial meltdown stemmed from highly volatile exchange rates that delivered impact to the financial sector, hurting banks and eventually triggering an economical crisis. The OJK requires a lesson from that for more prudent and more specific overseeing measures against all individuals in the financial sector -- mostly conglomerations," he said.