Indonesia Supports the Improvement of Banking Regulations

Indonesia is supporting efforts to improve regulations related to financial institutions. This is part of the agreement made by finance ministers and central bank governors of G-20 countries in London, last week.

The meeting requires banks to increase the amount and quality of their capital reserves, including their assets.

Finance Minister, Sri Mulyani Indrawati, said that the problem with PT Bank Century, Tbk should be an example that the role of regulations over banking and finance institutions is important.

Finance institutions have behaviors and instrument innovations that tend to move faster than regulators and supervisors.

“There should be boundaries to control these,” said Sri Mulyani at her office, on Monday evening (7/9).

The G-20 meeting agreed to tighten up regulations about minimum capital reserves.

It also discussed salaries and remuneration in the banking industry.

The country members still have different opinions about this matter. “France asked for salaries to be arranged but other countries said it was only necessary to regulate the structure,” she said.

The minister explained that the regulation over capital reserves was needed so that bank owners with limited capital would not absorb people’s funds.

The crises in 1997 and 1998 have shown that improvements are still needed in monitoring banking and financial institutions.

Improvements can be applied through two approaches including upgrading regulations and developing the capacity and quality of supervisors.

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