JAKARTA, June 3 – The Indonesian parliament’s financial commission and the government agreed at a hearing on Wednesday to reform the laws relating to the country’s financial system and expand the mandate of the central bank to include the promotion of economic growth.
The bill will still need to be approved by the full parliament before it becomes law, but parliament typically follows the commission’s recommendations.
Here are the details:
• The bill approved by the commission and several ministers, including Finance Minister Purbaya Yudhi Sadewa, includes changes that strengthen the institutions of Bank Indonesia (BI), the Financial Services Authority and the Indonesian Deposit Insurance Corporation, and also gives parliament the power to evaluate the performance of those institutions, according to Mohamad Hekal, the deputy head of the commission.
• It also covers a wide range of other rules, including a plan to demutualise the Indonesia stock exchange, rules relating to debt papers issued by sovereign wealth fund Danantara, and rules regarding a bourse for minerals and strategic commodities, Hekal said.
• Minister Purbaya said during the hearing that he agreed with the commission to strengthen BI’s goals and require it to implement “policy and policy mixes that create an economic environment conducive to real sector growth and job creation”.
• He also said that recommendations from parliament that arise from the evaluation of financial regulators will be binding, confirming a Reuters report from October last year.
• The full details of the changes were not read out during the meeting, which was broadcast live.
• Tommy Kurniawan, one of the lawmakers, said during the hearing that the widening of BI’s mandate must also align with the central bank’s independence, which is seen as the main pillar of monetary policy credibility and economic stability.
• BI’s board of governors have said they already consider economic growth during their monthly policy reviews.
• BI raised interest rates by 50 basis points last month to try to support the falling rupiah currency.
(Reporting by Gayatri Suroyo; Editing by David Stanway)
