Academic journal article European Research Studies

The Function of Financiaal Services Authority (FSA) in Dispute Settlement Banking Customers in Indonesia

Academic journal article European Research Studies

The Function of Financiaal Services Authority (FSA) in Dispute Settlement Banking Customers in Indonesia

Article excerpt

1. Introduction

The process of globalization in the financial system and the rapid advances in information technology and financial innovation has created a financial system that is highly complex, dynamic, and interconnected financial inter-sectors both in terms of products as well as institutional. In addition, the financial services institution that has ownership ties in various financial subsectors (conglomerate) has added to the complexity of the transaction and interaction among financial services institutions in the financial system.

There are many problems issues in the financial services sector, which includes acts of moral hazard, un optimal consumer protection financial services, and disruption of the stability of the financial system further encourage the need for the establishment of supervisory agencies in the financial services sector are integrated.

Supervision is required because of the potential of moral hazard (misappropriation / misuse) by economic actors that would have a negative impact on the economy. Economic theory shows that the moral hazard caused by the presence of asymmetric information. Asymmetric information is a condition where the information was not spread evenly among economic actors. Asymmetric information causes two things, namely moral hazard and adverse selection (pick error) (Hermansyah, 2013).

Practice of moral hazard in the financial sector, not only be done by financial institutions, but may also be done by the customer / household. Moral hazard occurs due to the weak system of supervision of financial institutions that are caused by several factors, among others: Weak system of supervision institutions in Indonesia; the absence of exchange of information flow (data sharing and data interfacing) among supervisory institutions of financial institutions; as well as the still high egocentric among supervisory institutions of financial institutions (Hermansyah, 2013; Papagiannis, 2014; Denisova et al., 2017; Novokreshchenova et al., 2016).

Bank supervision in principle are divided into two types, namely, supervision in order to encourage economic growth and maintain financial stability (macro economic supervision), and the supervision of individual banks to encourage healthy and able to preserve the interests of society with good (prudential supervision). Thus it can be understood that even if one of the purposes of bank supervision is to create and maintain a safe banking security and the interests of society, but it does not mean that the regulatory authorities should take responsibility for all of the circumstances of each bank (Sutedi, 2014; Cipovova and Dlaskova, 2016; Glavina, 2015; Carstina et al., 2015).

Financial Services Authority (FSA) is a new agency established under Act Number 21 of 2011 (Act FSA). The center was established to supervise the financial services industry in an integrated manner (Thalassinos and Liapis, 2014; Thalassinos et al., 2015). In accordance with the contents of Article 1 paragraph 1 of Act Number 21 of 2011 the Financial Services Authority, the FSA is an independent institution and free from interference by other parties, which has the functions, duties, and authority of regulation, supervision, inspection, and investigation as referred to in This Act. Furthermore, with the FSA, supervision of all financial services industry will be united under one roof, namely banking, capital markets, insurance, pension funds, non-bank financial institutions. Act only excludes the futures trading industry course of supervision the FSA.

FSA has a functions, duties and powers in carrying out his duties as an institution that regulates and oversees nearly the entire financial services sector in Indonesia. Article 4 of Act FSA has explained the purpose of establishing the FSA to the overall activities in the financial services sector can: Into a regular basis, fair, transparent, and accountable; able to realize financial systems grow in a sustainable and stable and capable of protecting the interests of consumers and society. …

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