JAKARTA, June 3 - Lawmakers on the parliamentary financial commission and senior government ministers agreed at a Wednesday hearing to move forward with legislative changes that would reform Indonesia's financial regulatory framework and broaden the central bank's remit to explicitly include the promotion of economic growth.
The measure, as endorsed by the commission and ministers that attended the session, must still receive a vote by the full parliament before it can become law. Parliament, however, typically follows the commission's recommendations.
Scope of the bill
According to Mohamad Hekal, the deputy head of the financial commission, the draft approved at the hearing contains provisions designed to reinforce the institutional position of Bank Indonesia (BI), the Financial Services Authority and the Indonesian Deposit Insurance Corporation. The text would also create a role for parliament to evaluate the performance of those institutions.
The draft encompasses a wider set of legal changes beyond regulator mandates. Hekal said it covers proposals to demutualise the Indonesia stock exchange, to set rules governing debt instruments issued by the sovereign wealth fund Danantara, and to establish regulations for a bourse dealing in minerals and strategic commodities.
Comments from the finance minister
Finance Minister Purbaya Yudhi Sadewa, who took part in the hearing, voiced support for strengthening BI's objectives. He said the central bank should be required to implement "policy and policy mixes that create an economic environment conducive to real sector growth and job creation."
Minister Purbaya also said that recommendations from parliament arising from evaluations of financial regulators would be binding, confirming a report from October last year that addressed similar developments.
Questions of independence and process
Not all wording of the proposed changes was read aloud during the live-broadcast hearing; full details of the amendments were not presented in the session. Lawmaker Tommy Kurniawan stated at the hearing that any expansion of BI's mandate must remain compatible with the central bank's independence, which he described as the central pillar of monetary policy credibility and economic stability.
BI's board of governors has said that in practice they already factor economic growth into their monthly policy deliberations. Separately, BI raised interest rates by 50 basis points last month in an effort to support the rupiah as the currency weakened.
Next steps
The commission-backed bill now proceeds to the full parliament for consideration. The deliberative process and final vote will determine whether the proposed changes enter law.