95 banks book windfall profit from forex trade<\/p>\n
JAKARTA (JP): The drastic fall of the rupiah against the U.S.
\ndollar has brought a windfall profit to 95 foreign exchange
\nbanks, the Indonesian Business Data Center (PDBI) said yesterday.<\/p>\n
They recorded a combined foreign exchange income of Rp 25.7
\ntrillion (US$1.8 billion at the current rate) last year, which
\naccounted for 32.5 percent of their total income in 1997.<\/p>\n
The center said 58 percent of the forex income was accrued
\nfrom forex trading and the rest was from interest earnings on
\nforex loans.<\/p>\n
The seven state banks gained Rp 13.8 trillion of the total
\nforex earnings and the rest went to local private banks, joint-
\nventure banks and foreign banks with branches here.<\/p>\n
However, PDBI warned that the analyses was based on 1997
\nfinancial reports and did not include forex losses reported in
\nthe first half of this year.<\/p>\n
The banking community was shocked by an acknowledgement from
\nstate Bank Ekspor Impor Indonesia (Bank Exim) in March that it
\nwas facing large losses from forward foreign exchange deals, in
\nwhich the bank had contracted to sell a total of $2.2 billion at
\nan exchange rate of Rp 2,725 to the U.S. dollar.<\/p>\n
PDBI added that its analysis of the 95 banks excluded data not
\nincluded on their balance sheets.<\/p>\n
The center also reported that the 95 banks extended a total of
\nRp 133.4 trillion in forex loans, or 38.6 percent of their total
\ncredits at the end of 1997.<\/p>\n
Domestic private banks issued Rp 61.5 trillion in forex loans
\nwhich produced Rp 5.7 trillion in interest earnings.<\/p>\n
However, the huge forex credits were not matched by reserves
\ndenominated in foreign currencies held by the 95 banks. Foreign
\ncurrency holdings stood at Rp 95.4 trillion at the end of last
\nyear resulting in a deficit of Rp 37.9 trillion.<\/p>\n
\"This will hinder their future performance. Moreover, in the
\nrupiah sector they have already suffered a large negative spread.
\nThis is dangerous and has the potential to become a time bomb in
\n1998,\" Beni Sindhunata warned.<\/p>\n
The continuing depreciation of the rupiah against the U.S.
\ndollar has caused forex loans made by Indonesian commercial banks
\nto swell from Rp 86 trillion in August 1997 to Rp 180 trillion in
\nApril 1998.<\/p>\n
In dollar terms, forex loans expanded by only 10.5 percent
\nover that period.<\/p>\n
Forex loans<\/p>\n
Forex loans to local corporations have the potential to turn
\nbad because most indebted local firms hold unhedged debts.<\/p>\n
PDBI reported the previous day that 215 of the country's 289
\npublicly listed companies recorded a combined loss of Rp 19.1
\ntrillion.<\/p>\n
\"Forex income in the banking sector was bigger than the losses
\nbooked by 215 corporations,\" PDBI chief research officer Beni
\nSindhunata said in the statement.<\/p>\n
\"At a time when the industrial sector is bearing an
\nextraordinary burden because of unhedged debts, the banking
\nindustry has made large profits from forex trading and exchange
\nrate differentials.\"<\/p>\n
PDBI suggested that the banks should help the indebted
\ncorporations by restructuring their forex debts through an agency
\nsimilar to the Indonesian Debt Restructuring Agency (INDRA).<\/p>\n
INDRA, which emerged out of the Frankfurt corporate debt
\nagreement, provides exchange rate risk protection and guarantees
\nthe availability of foreign exchange to private debtors that
\nagree with creditors to restructure external debts over a period
\nof eight years, including a three year period of grace during
\nwhich no principle needs to be repaid.<\/p>\n
\"To salvage the loans and help local businesses, especially
\nforex debtors, it is necessary to consider the establishment of
\nan agency similar to INDRA which is specifically designed to
\ntackle domestic forex loans,\" Sindhunata said.<\/p>\n
He suggested that the 13 local banks which had issued 81
\npercent of the total domestic forex loans at the end of 1997 form
\na consortium to represent lending banks in restructuring domestic
\nforex loans. (rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/95-banks-book-windfall-profit-from-forex-trade-1447893297",
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