Wednesday, 19 March 2014


Lately there was mounting public criticism on the role of the Financial Service Authority [OJK] as a new financial authority. From mandatory collection imposed on financial institutions effective per March 1, 2014 till its state of independence in Indonesia’s financial structure.

It was noteworthy that in spite of stormy protest from the banking industry, OJK claimed they would continue to publicise matters related to retributions effective as per March 1, 2014. Chairman of the Board of Commissioner of OJK Muliaman Darmansyah Hadad disclosed that further illumination was necessary so the financial industry could fully understand the mechanism of retribution, including matters related to sanction on late payers. Publicizing had been exercised before Presidential Regulation [PP] was issued.

Furthermore OJK stated that in case of collection target 2014, OJK was in no condition to predict the amount, but OJK was expected to be more independent in collecting the fund so they needed not to rely on APBN budget. Meanwhile, in response to some bankers’ grievances that the retribution should be burdened on Deposit Insurance Agencies [LPS], OJK executives undertscored that they would still make the collection as it was legally justifiable.

The Presidential Regulation [PP] which regulated the retribution was already signed by President Susilo Bambang Yudhoyono. The size of collection for each financial institution differed from one another and would be collected every three monthly. Previously retribution was on LPS’s account. Only trouble was the retribution was collected every three months.

As they objected the retribution, banks signaled that they would increase bank’s interest which meant customers had to bear the consequences. Might as well OJK was burden to consumers. By calculation, total banking asset was posted at Rp 4,773 trillion. Assuming the retribution was 0.03%, banks must pay OJK the amount of Rp 143,19 billion per quarter. Naturally, this fantastic figure triggered hard protest. Allegations came up that OJK’s right to make the collection was under question. Meaning once the rule was exercised, there should be check and balance and control on all funds entering OJK’s cashbox.

To that policy, many banks stated there grievances and objections as it was felt as heavy burden especially for small banks whose profitability was low. Furthermore banks as national businessplayers did not wish to lose. The undesirable thing was that banks would go their own way by increasing credit interest and consumers were bound to be disadvantaged.

Therefore solution was needed to this matter; it must not burden the people as bank customers because of Government’s policy. As footnote, OJK would impose retribution of 0.03% - 0.45% of the bank’s asset. Some banks state their objections because they were paying LPS also.

The Association of National Banks were worried about OJK retribution if they were to be burdened on consumers. OJK retribution tend to force banks to increase interest and cost of fund. In fact from the industry side there was no problem with this OJK collection.

Cost of fund was expenses to obtain deposit after additional mandatory reserve stipulated by the Government. Therefore there must be no perception that the role of OJK increased cost for the public. The banking industry was in no position to refuse paying retribution as it had legal ground.

Noteworthy was the fact that there were allegations that the PP No. 11 2014 on Retribution by OJK was rated as changing the main function of OJK as controller of the financial sector to become collector of fund of Non-tax state income. In law no 21 2011, OJK was established to regulate, inspect and protect customers of the financial service industry in Indonesia.

Supposedly OJK could prove their performance first considering that for the past 2 years nothing impressive was ever seen in OJK performance. As with substance, the PP did not make OJK independent. The imposition of retribution based on classification would eventually pose as burden to the industry and the consumers.

The Presidential Regulation caused high economic cost in the financial service sector and might tend to stagnate growth of the financial service sector. The OJK Law stated that OJK was set up with the objective to set up a financial system which grew sustainably. The collection regulated in the PP had the potential to burden customers and kill small banks.

For example micro financial body had to pay permit expenses of Rp50 million, while the their circulated asset was only Rp100 million per year, not to mention Rp10 million due for examination and supervision expenses as in enclosure 2 PP No. 11 2014.

In fact OJK financing could have been taken from various sources like APBN State Budget, LPS of BI the way it was applied in England so OJK’s creditability and reputation could be accountable. By logic an inspector must be independent and had no ties with the inspected. The fear that financial institutions would put the burden on customers became reasonable.

Although the percentage was small it was still something to be calculated. It was true that nearly all banks stated they would not put the OJK collection burden in customers, but it would be calculated as operational cost in was already inclusive in bank interest calculation.

Supposedly OJK obtained funding by combining APBN state budget and collection from the financial industry until finally became independent by 2016. By the Law, the financial industry could not reject OJK as the system was stipulated in the Presidential Regulation.

OJK officials were obliged to do their duties well, so they were able to create a healthy climate for the financial industry. The financial industry deserved to get the best from the retribution which they paid. Not by enjoying benefits like eased controlling, but to have return in the form of training facilities for promoting professionalism.

So the for or against OJK collection un the debate better be stopped lest it might turn into counter productive issue. All parties had their own responsibility and they must remind each other. But in case of dispute over OJK’s independence expressed by some circles, let the Constitutional Court settle the matter fairly and wisely. (SS)

Business New - March 5, 2014

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