June 19, 2012 / 2:12 PM / 7 years ago

UPDATE 2-Indonesia picks Hadad to head financial regulator

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JAKARTA, June 19 (Reuters) - Indonesia’s parliament chose Muliaman D. Hadad, a deputy governor at the central bank, as chairman of a new financial services authority on Tuesday in a move that could smooth coordination in supervising the financial sector.

Hadad, 52, has been a deputy governor since 2006 and is in charge of banking regulation at the central bank. He has also played a key role in drafting a proposed Indonesian bank ownership rule that may cap bank ownership by a single institution at less than 50 percent.

The new financial services authority, known as Otoritas Jasa Keuangan or OJK, will take over supervision of banks, brokerages and insurance firms from the central bank and the capital market watchdog Bapepam-LK starting from 2013. The OJK partly uses the UK’s Financial Services Authority as a model.

“We expect in the next 10 years Indonesia can be a financial hub regionally,” said Arif Budimanta, lawmaker of the opposition Indonesian Democratic Party of Struggle.

“We expect (Hadad) can lead the OJK to strengthen supervision and develop inclusive financial sector services,” he said. Hadad’s selection had been expected and the vote was unanimous.

The plan to create the regulator came after the 1997/98 Asian financial crisis during which many Indonesians banks collapsed or were shut down. Parliament approved the OJK last year despite reluctance by the central bank to relinquish power.

Bank Indonesia has improved banking supervision in recent years. In the 2008 global credit crisis Indonesian banks were well capitalised and mostly escaped unscathed.

The decision to appoint Hadad is likely to bridge cooperation between the central bank and OJK. In the first few years, Bank Indonesia and Bapepam-LK employees will be asked to work for the OJK. (Reporting by Aditya Suharmoko and Adriana Nina Kusuma; Editing by Matthew Bigg and Susan Fenton)

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