Archive for March, 2010
The Structure of Financial System Supervision Model
March 30th, 2010 | 
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Prevailing consensus states in Indonesia that where appropriate the selection approach in forming the structure of financial system supervision model should be based on: (i) the need to consolidate and summarize a complex structure, (ii) emphasis on the clarity of the basic principles of regulation, (iii) the need to carry out international coordination related to standards and regulations, (iv) the existence of a flexible regulations to adapt the type of new institutions and new financial instruments, (v) there is independence in the market authorization politics between national regulations, (vi) the central bank’s role in the creation of financial stability must be supported by adequate authority and capacity, (vii) the quality of human resources who have integrity and competence. OJK formation is inseparable from good preparation cost of establishment costs, operational and transaction costs.
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The OJK Formation
OJK formation cannot be separated from the situation in the world economy during the economic crisis in 1997/1998. Bank Indonesia is not considered optimal in performing supervisory functions because at that time demonstrated that many banks collapsed due to mismanagement and false alert. Data show that there are five forms of banking supervision, nonbank and capital market such as the institutional (based on the legal status of which will be supervised), functional (based on business transactions), integration (single supervision), twin peaks (based on the objective) and the shape of exceptions such as the U.S. The fifth form of the existing oversight structure and has been accepted globally although no examples of countries that apply the exact same line with this approach. Each approach is structured based on the uniqueness of history, politics, culture, economic development, and structure of its local business.