Zulkarnain Sitompul testifying as a law expert for the Petitioners at a judicial review hearing of Law on Financial Sector Development and Reinforcement, Tuesday (11/12/2024). Photo by MKRI/Panji.
JAKARTA (MKRI) — The Petitioners of case No. 85/PUU-XXII/2024 presented two expert to testify at a judicial review hearing of Law No. 4 of 2023 on the Financial Sector Development and Reinforcement (PPSK Law) in the plenary courtroom on Tuesday, November 12, 2024. They are law expert Zulkarnain Sitompul and constitutional law expert Indra Perwira.
Sitompul, who was once the Financial Services Authority’s (OJK) deputy commissioner for law, stated that the finance minister’s approval of the Deposit Insurance Corporation’s (LPS) operational annual work plan and budget (RKAT) constitutes an intervention that is not based on necessity and balance, as the LPS’ budget does not come from the state budget (APBN). Instead of improving the LPS’ accountability such an intervention is counterproductive on the LPS’ independence, which in turn would reduce customers’ trust in bank savings and the banking systems as a whole, he argued.
“In fact, LPS has been provided with equipment for supervision so its independence is also equipped with sufficient accountability, such as periodic reports to the House of Representatives (DPR). LPS also has a supervisory board, which is the House’s extension to oversee LPS’ daily activities. LPS’ financial statements are also examined by BPK (Audit Board),” Sitompul said.
He believes LPS should have independence both in exercising its authority and in managing its own budget. In countries where the finance minister oversees the LPS, the minister does not go too far into budget approval, as applies in South Korea and the United States. The finance minister’s intervention of the LPS budget in this process is not in line with the LPS’ independence of the as stipulated in the PPSK Law.
Even without the Finance Minister’s approval of the LPS’ work plan and budget, the current accountability and transparency mechanism is adequate because it applies a layered supervisory mechanism, including quarterly and annual institutional performance report to the president and the House, information to the public regarding the implementation of LPS’ policies in the past year and policy plans for the coming year, annual financial report to the president and the House as well as the BPK, representation of one echelon I-level official of the Finance Ministry in the LPS’ ethics council, and the LPS’ supervisory board which, among others, is authorized to receive a copy of the LPS’ annual financial report, conduct a review of the LPS’ operational budget, and request the LPS’ explanation and response on the results of the board’s review.
“Therefore, the provision om the Finance Minister’s approval of the LPS’ RKAT is a form of interference that is unnecessary and unbalanced considering that the budget used by LPS does not come from the state budget,” said Sitompul.
Meanwhile, Indra Perwira said the provision on the Finance Minister’s approval in the preparation of the LPS’s operational work plan and budget is a constitutional issue that, if not resolved, would lead to violations of the constitutional rights of bank customers. Although there is no constitutional norm that explicitly and directly regulates the LPS’ independence, nor is the LPS mentioned in the 1945 Constitution, it does not mean that the institutional arrangements for the function of guaranteeing bank customers’ deposits and handling/solving bank failure does not concern constitutional issues.
“This issue is not a matter of mere design choices that regardless of how the legislatures regulates, will not affect the protection of the constitutional rights of bank customers,” Indra said.
The constitutional justices questioned the link between the Finance Minister’s approval of an institution’s budget and that institution’s independence. In fact, said Constitutional Justice Arsul Sani, the Constitutional Court’s budgets are not only approved but even determined by the Finance Minister, but he emphasized that it had not interfered with his independence as a justice at the Constitutional Court.
Deputy Chief Justice Saldi Isra also made the same question. He asked the Petitioners’ expert for an explanation of the Finance Minister’s function as the state treasurer who has high authority over fiscal matters and is also a member of the Financial System Stability Committee (KSSK). The KSSK consists of the Finance Minister, the governor of Bank Indonesia, the chairperson of the Financial Services Authority’s (OJK) ethics council, and the chairperson of the LPS’ ethics council.
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The Petitioners—two lecturers and one university student—challenge Article 7 points 6 and 57; Article 86 paragraphs (4), (6), and (7) letter a; and Article 276 points 3, 13, and 24 in Law No. 4 of 2023 on the Financial Sector Development and Reinforcement (PPSK Law). Giri Ahmad Taufik (Petitioner I) is a constitutional law lecturer at Djuanda University in Bogor while Wicaksana Dramanda (Petitioner II) is a constitutional law lecturer at the Islam University of Bandung. Mario Angkawidjaja (Petitioner III) is a university student and customer of microcredit bank (BPR) Nusantara Bona Pasogit (NBP) 31 Jatinangor.
They argue that there is potential constitutional impairment due to the enforcement of the articles, which authorize the LPS to be able to place funds in banks under restructuring based on requests from the Financial Services Authority (OJK), which could potentially overlap with the authority of Bank Indonesia (BI) as the lender of last resort.
Moreover, the authority of LPS in placing funds in banks under restructuring has different requirements that are easier, in this case, those that do not meet the Short-Term Liquidity Loans based on Sharia principles owned by BI. As a result of this vagueness and overlap, there is the potential to burden LPS, in this case reducing its ability and leading to the failure of LPS to carry out its main function, namely guaranteeing customer deposits, which is a form of protection of the Petitioners’ deposits.
In addition, the Petitioners believe government intervention in the form of the Minister of Finance’s approval of the LPS annual work plan and budget in these articles raises legitimate doubts on the customers’ side regarding the legal certainty that the LPS will exercise its authority professionally and based on expertise alone, without political interference. Although independence has accountability limits, the Minister of Finance’s approval authority in these provisions lacks the basis of necessity and balancing.
In terms of necessity and balance, the highly interventionist provisions on work and financial planning for LPS operational activities do not have a strong reason, considering the institutional design of LPS, which is led collectively collegially by all members of the board of commissioners, where all LPS decisions must be made through a process of deliberation for consensus (vide Article 7 point 46 of Law No. 4 of 2023, which amends Article 72 paragraph (1) of Law No. 24 of 2004).
In their petitums, the Petitioners request that the Court nullify Article 7 points 57 of Law No. 4 of 2023, which amends the phrase “to obtain approval” in Article 86 paragraph (4) of Law No. 24 of 2004; and the phrase “who has obtained the approval of the Minister of Finance” in Article 86 paragraph (7) letter a of Law No. 24 of 2004. In addition, they request that Article 7 point 6 and Article 276 point 13 be declared unconstitutional and not legally binding.
Author : Mimi Kartika
Editor : Nur R.
PR : Fauzan F.
Translator : Yuniar Widiastuti (NL)
Disclaimer: The original version of the news is in Indonesian. In case of any differences between the English and the Indonesian versions, the Indonesian version will prevail.
Tuesday, November 12, 2024 | 15:53 WIB 57