As mandated in Law No. 21 of 2011 regarding the Financial Services Authority (OJK Law), supervision of Indonesia's capital markets and non-bank financial institutions was transferred from the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK), part of the Ministry of Finance, to the OJK as of December 31, 2012. Oversight of the banking industry was transferred from Bank Indonesia to the OJK on December 31, 2013.
We look at some of the changes that have been introduced since the OJK took over supervision of the capital markets, non-bank financial institutions and banking sectors.
A.√Ç¬†√Ç¬†√Ç¬†√Ç¬†√Ç¬†√Ç¬†√Ç¬† Regulatory Reform
Since the transfer, we note that the OJK has enacted numerous regulations for each sector. We highlight some of the most significant, as follows:
- Banking Sector: OJK Regulation (POJK) No. 16/POJK.03/2013 regarding Asset Quality Assessment for Sharia Commercial Banks and Sharia Units POJK No. 20/POJK.03/2014 regarding Rural Banks POJK No. 21/POJK.03/2014 regarding the Obligation to Provide Minimum Capital for Sharia Commercial Banks and POJK No. 19/POJK.03/2014 regarding Financial Services without Office within the Framework of Inclusive Finance.
- Capital Markets Sector: POJK No. 39/POJK.04/2014 regarding Selling Agents of Mutual Fund Securities POJK No. 32/POJK.04/2014 regarding the Planning and Implementation of the General Meeting of Shareholders of Public Companies and POJK No. 33/POJK.04/2014 regarding Directors and Commissioners of Issuers or Public Companies.
- Non-Bank Financial Sector: Law No. 40 of 2014 regarding Insurance POJK No. 30/POJK.05/2014 regarding Good Corporate Governance for Financing Companies POJK No. 28/POJK.05/2014 regarding Licensing and Institutional Financing and POJK No. 9/POJK.05/2014 regarding the Dissolution and Liquidation of Pension Funds.
In addition to the above, the OJK and the government have enacted several regulations that apply for all of the industries supervised by the OJK. These include Government Regulation No. 11 of 2014 regarding Levies Imposed by the OJK, POJK No. 1/POJK.07/2013 regarding Consumer Protection in Financial Sectors, and POJK No. 1/POJK.07/2014 regarding Alternative Dispute Resolution in the Financial Sector.
1.√Ç¬†√Ç¬†√Ç¬†√Ç¬†√Ç¬†√Ç¬†√Ç¬†√Ç¬† Judicial Review of the OJK
There has been some controversy surrounding the OJK and its supervisory powers over the various financial sectors. In particular there have been questions about the independence and constitutionality of the OJK. This was the main basis for a judicial review of the OJK Law that was sought at the Constitutional Court in the first quarter of 2014. The judicial review was filed for by activists calling themselves Tim Pembela Kedaulatan Ekonomi Bangsa, or Defenders of the Nation√¢¬Ä¬ôs Economic Sovereignty.
Among the articles of the OJK Law being reviewed are Article 1 paragraph (1) on the definition of the OJK, particularly the term independent Articles 5, 6 and 7 on the duties and functions of the OJK Article 37 on the imposition of levies Article 55 on the timing of the transfer of supervisory duties from Bapepam-LK and Bank Indonesia to the OJK and Articles 64, 65 and 66 on transitional provisions for Bapepam-LK and Bank Indonesia employees, assets and duties transferred to the OJK during the early period of the OJK
In their petition, the activists asked the Constitutional Court to dissolve the OJK. This petition is still being examined by the Constitutional Court, which we note has held eight hearings on the matter to date.
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