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Ada Pertanyaan? Hubungi Kami Fathan Qorib, Christina Desy
Reflecting on the global economic crisis of 2008, the Financial Services Authority (OJK) is planning to issue a regulation on risk management that will apply to groups of large interrelated businesses, so called financial conglomerates.
Financial conglomerates usually combine two or more financial services companies with different businesses. These companies are usually part of a larger corporate group, consisting of a parent company and many subsidiaries.
In the case of Indonesia, financial conglomerates dominate approximately 70% of Indonesia’s financial industries under 31 financial conglomerates and with IDR 5,300 trillion in hand. Based on these figures, it is evident that Indonesia’s financial conglomerates face potential risks if a crisis occurs.
Due to these circumstances, Boedi Hermanto, Head of Development Supervision and Crisis Management at the OJK, said that a risk management regulation is necessary to prevent the financial conglomerates from causing systemic impacts which could lead to a larger economic crisis, similar to what happened with the large financial conglomerates in United States starting with Lehman Brothers.
The regulation on risk management, as Mr. Hermanto said, will set out provisions on integrated risk management to be implemented among financial conglomerates. The matters that will be covered include integrated risk management procedures, limits determination, measurement, identification processes, up to and including information systems.
Mr. Hermanto further explained that the regulation will allow each financial conglomerate to determine which company will act as the primary entity for a conglomerate. In turn, this main entity will act as a holding company and will be responsible for organizing the implementation of integrated risk management regulations within their respective group.
While each financial conglomerate—via its controlling shareholders—has the power to appoint the main entity, the OJK may veto such appointments. According to Treesnawati Gani, Director of Commercial Bank Regulation at the OJK, such veto is possible if the OJK finds that the appointed entity does not comply with verifications by the OJK. The methods of verification and related requirements, however, have not yet been explained by OJK officials.
(hot/kc)
Fathan Qorib, Christina Desy
Reflecting on the global economic crisis of 2008, the Financial Services Authority (OJK) is planning to issue a regulation on risk management that will apply to groups of large interrelated businesses, so called financial conglomerates.
Financial conglomerates usually combine two or more financial services companies with different businesses. These companies are usually part of a larger corporate group, consisting of a parent company and many subsidiaries.
In the case of Indonesia, financial conglomerates dominate approximately 70% of Indonesia’s financial industries under 31 financial conglomerates and with IDR 5,300 trillion in hand. Based on these figures, it is evident that Indonesia’s financial conglomerates face potential risks if a crisis occurs.
Due to these circumstances, Boedi Hermanto, Head of Development Supervision and Crisis Management at the OJK, said that a risk management regulation is necessary to prevent the financial conglomerates from causing systemic impacts which could lead to a larger economic crisis, similar to what happened with the large financial conglomerates in United States starting with Lehman Brothers.
The regulation on risk management, as Mr. Hermanto said, will set out provisions on integrated risk management to be implemented among financial conglomerates. The matters that will be covered include integrated risk management procedures, limits determination, measurement, identification processes, up to and including information systems.
Mr. Hermanto further explained that the regulation will allow each financial conglomerate to determine which company will act as the primary entity for a conglomerate. In turn, this main entity will act as a holding company and will be responsible for organizing the implementation of integrated risk management regulations within their respective group.
While each financial conglomerate—via its controlling shareholders—has the power to appoint the main entity, the OJK may veto such appointments. According to Treesnawati Gani, Director of Commercial Bank Regulation at the OJK, such veto is possible if the OJK finds that the appointed entity does not comply with verifications by the OJK. The methods of verification and related requirements, however, have not yet been explained by OJK officials.
(hot/kc)