THE amended Financial Sector Development and Strengthening Law (P2SK Law) were passed last month. It introduces a fundamental change. Parliament now has the authority to dismiss the Governor of Bank Indonesia and its deputy governors. It can also effectively “fire” commissioners of the Financial Services Authority (OJK) and the Indonesia Deposit Insurance Corporation (LPS), subject to the “subjective” judgment of members of the House of Representatives. As a result, BI, OJK, and LPS can no longer be regarded as truly independent institutions.

            Thus, when news broke that the amendment to the P2SK Law had been approved during a plenary session of Parliament, coinciding with rumors of a possible change in the leadership of Bank Indonesia, the market was not reading the text of the law. The market was reading the political context. And in finance, as we have repeatedly witnessed, perception is often as powerful as fact.

            According to Infobank’s view, independence is not the same as immunity from oversight. Yet this is where a fatal misunderstanding often occurs in public debate. Independence is frequently mistaken for unlimited freedom, a state within a state, an ivory tower immune from scrutiny. Nothing could be further from the truth.

            Every major central bank in the world is subject to oversight. Parliaments have the right to demand explanations. The public has the right to know how and why policies are made. Transparency is, in fact, one of the principal pillars of modern central-bank credibility. Yet there is an extraordinarily thin line, as thin as a strand of silk, between oversight and control.

            Consider the Federal Reserve in the United States. Jerome Powell, Chair of the Fed, regularly appears before Congress. He answers difficult questions from senators and members of the House. He explains why interest rates are raised, why quantitative easing is implemented, and why inflation projections change. Yet at the end of those oftenexhausting hearings, Congress cannot dismiss Powell simply because it dislikes his answers. Nor can it replace the Chair of the Federal Reserve simply because interest rates are deemed too high ahead of an election.

            In the United Kingdom, the Treasury Committee of the House of Commons regularly conducts hearings with the Governor of the Bank of England. The questions can be sharper than a surgeon’s scalpel. Yet the mechanism exists to ensure public accountability, not to serve as a tool for replacing officials. The same principle applies across the European Union and Japan.

            Evaluation is a beautiful word. It sounds democratic, participatory, and responsible. Who could oppose evaluation? Shouldn’t every public official be evaluated? Shouldn’t power be held accountable?

            This is where we must pause and ask the most fundamental question: Is the amendment to the P2SK Law genuinely intended to strengthen governance within Indonesia’s financial sector? Or does it create a new political pathway through which the leadership of OJK, LPS, and Bank Indonesia can be influenced?

            Central banking institutions, particularly Bank Indonesia and OJK were not created to serve the government of the day. They were created to safeguard the economy long after governments have changed. They are institutions that transcend electoral cycles. Governors P2SK Law Amendment: Who Guards the Guardians? of Bank Indonesia come and go. Governments come and go. Yet the rupiah, the currency entrusted to these institutions must endure.

            When Parliament gains the authority to evaluate and dismiss the Governor of Bank Indonesia and the commissioners of OJK and LPS during their terms of office, the question is no longer whether evaluation is necessary. The question is: who will become the master of that evaluation? Will it be based on objective and measurable criteria, or on fluid and ever-changing political preferences?

            The real issue is not whether the Governor of Bank Indonesia, OJK commissioners, or the Chairman of LPS deserve to be evaluated. Of course they do. Every holder of public office must be prepared to undergo evaluation. That is the consequence of authority entrusted by the people through democratic institutions.

            Before all of this unfolds, however, it is worth asking once again: Is this amendment intended to oversee or to dominate? The answer appears clear. It is intended to exert control over BI, LPS, and OJK. The government has become excessively dominant, backed by a supportive Parliament. And when evaluation becomes a political instrument, what is at stake is not merely the position of public officials, but the credibility of the nation’s financial system.

            Unfortunately, the P2SK Law has already been enacted. And Indonesia may now be returning to an earlier era in which Bank Indonesia lacked genuine independence and OJK faced pressure to follow government directives, even when such policies posed risks to the financial sector. If that proves to be the case, then Indonesia’s financial risks will only grow larger as a result of this amendment to the P2SK Law.

            Thus, when news broke that the amendment to the P2SK Law had been approved during a plenary session of Parliament, coinciding with rumors of a possible change in the leadership of Bank Indonesia, the market was not reading the text of the law. The market was reading the political context. And in finance, as we have repeatedly witnessed, perception is often as powerful as fact.