Editorial: OJK Will Provide Indonesia With the Right Solutions

When he starts his job as the chairman of the country’s Financial Services Supervisory Authority next month, Muliaman D. Hadad will have his work cut out for him. The new chairman will have to move quickly to shore up confidence in the industry and show his leadership qualities.

Among his top priorities will be to consolidate the more than Rp 8,300 trillion ($880 billion) in assets in the financial sector to shield it from being hit by the impact of the global financial turmoil.

The newly elected chairman of the agency known as the OJK has already called for a faster internal consolidation of all aspects of the financial regulatory body, especially from the Finance Ministry and the central bank. This is a positive move as he needs to send a clear message to the financial community of his intentions and direction.

“Supervision must not be business as usual… It’s not sectoral as we used to be,” Muliaman said on Wednesday on the sidelines of a conference held by the Indonesian Chamber of Commerce and Industry (Kadin). “The OJK is a combination of colleagues in Bank Indonesia and the Finance Ministry, so it needs a speedy internal consolidation.”

The new agency, like Bank Indonesia, will become an independent body and report to the House of Representatives.

The OJK will oversee banks, capital markets and non-bank financial institutions and will take over the dual roles currently performed by two different institutions.

The OJK has been in the works for some time and, despite facing some resistance, is necessary. If Indonesia is to become a regional financial hub, it must strengthen the banking system and make it more efficient. There are far too many banks at the moment, so consolidating the sector is critical.