The move has prompted speculation that intervention from the Financial Sector Policy Committee (FSPC) caused the two resignations, though both Ng and Mahmuddin have issued denials. The developments have also led lawmakers to pressure the government to end the powerful FSPC's control over the Indonesian Bank Restructuring Agency (IBRA).
At issue, is a contention that far from helping the Indonesian banking reform process, the FSPC has instead hindered the efficiency of IBRA.
IBRA was created in the wake of the 1997 financial crisis to reform the financial sector. IBRA controls some Rp 600 trillion ($62.5 billion ) worth of assets after it took over several banks that have since been merged and recapitalized. The assets include non-performing loans (NPLs) and stakes in several companies surrendered by former bank owners to repay their debt.
FSPC consists of several senior economic ministers led by Coordinating Minister for the Economy, Rizal Ramli. The committee has the final approval over IBRA's plans and their implementation.
The FSPC was formed in early 2000 after the Bank Bali scandal that allegedly involved a senior official of IBRA.
Paskah Suzetta, a senior legislator of the Golkar Party, during a hearing between the House of Representatives Commission IX on state budget and finance, and Finance Minister Prijadi Praptosuhardjo, suggested that the Finance Minister could propose to Indonesian President Wahid to dissolve the FSPC.
Legislators point out that according to law, there is no obligation for IBRA to seek the approval of the FSPC for its major bank and corporate restructuring programme. "IBRA should only report to the finance minister," Paskah emphasized.
Currently, IBRA needs FSPC's approval on any major debt restructuring or asset sale programme worth over Rp1 trillion. However, many of FSPC's decisions have been criticized as granting preferential treatment to some indebted conglomerates.
Last year, the International Monetary Fund criticized the delay in the sale of IBRA's stake in both Bank Central Asia and Bank Niaga.