Micha Paramitha. Banking and Finance 2012 – 2. 014201200047

Introduction

According to Article 34 of Act No. 3 of 2004 on the Amendment of Act No. 23 of

1999 concerning Bank Indonesia (BI), the government was mandated to create an

independent agency financial services sector, no later than the end of 2010. The institute is in

charge of overseeing the industry banking, insurance, pension funds, capital markets, venture

capital, and finance companies, and other entities operating in the management of p ublic

funds.

As a newly independent state agency in Indonesia, the Financial Services Authority is

expected to carry out one of the tasks of Bank Indonesia in supervising the banking sector in

Indonesia. The task of bank supervision is a critical task, especially in order to create a sound

banking system and the finally can drive the effectiveness of monetary policy. The reason for

the formation of the FSA is the increasing complex and the varied financial products, and the

globalization of the financial service industry. Beside that, one of the reason of the formation

of FSA is because the Central Bank or Bank Indonesia (BI) has failed in supervising the

banking sectors.

Financial Service Authority

OJK stand for Otoritas Jasa Keuangan or the Indonesia Finance Service Authority

(FSA). FSA is a state agency created by Act No. 21/2011 about FSA (Act FSA), approved on

22 November 2011, which to regulate, supervise, examine and investigate Finance (Banking,

Capital markets, Mutual funds, Corporate finance, Fund pension and Insurance) sector in

Indonesia. Based on the Act No.21/2011 the FSA is “Financial Services Authority,

hereinafter referred to as the FSA, is an independent institution, and free from interference by

other parties, which have the functions, duties, and authority of the regulation, supervision,

examination, and investigations referred in this Act."

The process of globalization in the financial system, the rapid advances in technology

also financial innovations have created a financial system that is so complex, dynamic and

interconnected between subjects in both financial and institutional products. Besides, the

existence of financial institutions that have ownership ties in various financial subsector has

increased the complexity of the transactions and interactions between financial institutions in

the financial system.

Micha Paramitha. Banking and Finance 2012 – 2. 014201200047

In addition to these reasons the formation of FSA that overall activity in the financial

services sector can be held on a regular basis, fair, transparent, and accountable financial

system which is able to realize sustainable growth and stable, and capable of protecting the

consumer interest and the public, which is realized through a system of regulation and

supervision of the whole integrated activities in the financial services sector.

Regulatory and supervisory functions of the bank was owned by Indonesian banks

move over to an independent financial institution, namely the Financial Services Authority

(FSA) in accordance with mandated by Article 34 of the Law No. 3 of 2004 change over the

Act number 23 of 1999 of BI. After the FSA was formed, the central bank will focus on the

powers of monetary policy is a policy to achieve and maintain rupiah stability is done

through controlling the money supply or interest rates. In performing its duties, the FSA will

undertake the coordination and cooperation with the Central Bank as the central bank. FSA

may issue regulations relating to the performance of duties of banks and ask for an

explanation from BI and macro data.

Conclusion

Based on the description that has been described in this paper concerned about the the

Financial Services Authority, it can be concluded as follows:

Financial Service Authority is an independent institution, and free from

interference by other parties, which have the functions, duties, and authority of

the regulation, supervision, examination, and investigations.

Financial Service Authority was created by Act No. 21/2011 about Financial

Service Authority.

The reasons the formation of Financial Service Authority that overall activity

in the financial services sector can be held on a regular basis, fair, transparent,

and accountable financial system which is able to realize sustainable growth

and stable.

The function of Financial Service Authority is as the regulatory and

supervisory functions of the bank or as Micro Prudential function.