Indonesia parliament may delay approval of new financial regulator

Indonesia's parliament may postpone until next year the setup of a new financial regulator aimed at improving banking supervision in Southeast Asia's biggest economy, three parliament members told Reuters on Monday.

The regulator, to be called OJK and expected to be similar to the U.K.'s Financial Services Authority, was meant to take over the current supervisory functions of the central bank and capital market watchdog Bapepam-LK in monitoring banks, brokers and fund management companies.

The parliament has a deadline of Dec. 31, 2010, to pass the OJK bill as stated in a 2004 central bank law, but there has been a deadlock with the government over the selection process of the OJK's board of commissioners.

However, despite the central bank law, the parliament was still expected to be able to vote on the issue next year, the parliament members said.

"We've asked for a time extension," Nusron Wahid, the head of the parliamentary committee in charge of drafting the bill, told Reuters.

To finish in December the parliament would have to approve the bill this week since it starts a recess next week until early January.

The parliament and the government have agreed that the OJK's board of commissioners will consist of nine members, with the finance ministry and the central bank each supplying one, but have disagreed over how to choose the rest.

"For the remaining seven, the parliament wants to have a say while the government wants the parliament to just confirm submitted names," Achsanul Qosasi, deputy of the parliament's financial commission and from the ruling Democrat Party, told Reuters.

Regulators around the world are revising rules governing the financial industry in the wake of a global credit crunch, though the move to set up the OJK stems not from 2008 but from 1998, when many Indonesian banks collapsed in the Asian financial crisis.

Bank Indonesia has been reluctant to relinquish its supervisory role over commercial banks on fears this could reduce its effectiveness in maintaining economic stability.

Commercial banks do not mind whether supervision comes from Bank Indonesia or the OJK, so long as the OJK's commissioners are competent, said Sigit Pramono, chairman of the Indonesian banks' association Perbanas. (Reporting by Aditya Suharmoko, Olivia Rondonuwu and Rieka Rahadiana; Editing by Neil Chatterjee)