Bank ratings needed to protect depositors<\/p>\n
JAKARTA (JP): An economist called yesterday for the
\nintroduction of bank rating agencies to help consumers assess the
\nhealth of the country's banks.<\/p>\n
The president of the Indonesian Business Data Center,
\nChristianto Wibisono, said bank ratings would enable the public
\nto make more informed choices, and would push banks to improve
\nthemselves.<\/p>\n
\"The public would know which local banks are healthy and which
\nones are not, and this would prevent depositors from moving their
\nfunds from local banks to foreign banks,\" Christianto said.<\/p>\n
He said bank ratings would show consumers that investing in
\nsome banks would be risky, so that depositors would leave banks
\nwith lower ratings and pick more sound ones.<\/p>\n
It would encourage some banks to strengthen themselves, and
\nmight push smaller banks to consolidate and merge, he said.<\/p>\n
He said the number of banks in the country should be at least
\nhalf the existing 221 banks, which include state-owned, private
\nand foreign banks.<\/p>\n
Christianto said Indonesia currently only had a rating agency,
\nPT Pefindo, which focuses most of its activities on commercial
\npaper and bond issuers.<\/p>\n
He said bank rating agencies must be independent of business
\ngroup owners, to prevent possible conflicts of interest.<\/p>\n
Affiliation with an established foreign institution would also
\nhelp build such an agency's credibility, he said.<\/p>\n
Christianto also called for the establishment of a banking
\ndepositors insurance, to guarantee that depositors would get back
\ntheir entire account balance should their banks close.<\/p>\n
Depositors must be insured by a consortium involving the
\ngovernment and private firms, he said.<\/p>\n
Insurance<\/p>\n
Many countries provide insurance for bank depositors to
\nprotect consumers from losing their money deposited in banks that
\nfile for bankruptcy.<\/p>\n
U.S. banks and other financial institutions are required to
\ninsure their depositors under the Federal Deposit Insurance
\nCorporation, which guarantees to reimburse deposits in case of
\nthe institution's collapse.<\/p>\n
Christianto said the U.S. government established the insurance
\nat a time when many of its financial institutions were tumbling.<\/p>\n
Separately, the Econit Advisory Group urged the government
\nyesterday to increase the capital requirement for private banks
\nto fortify the banking sector.<\/p>\n
Econit director Laksamana Sukardi said the existing capital
\nrequirement for banks to operate was still much lower than those
\nof other countries.<\/p>\n
\"The government must raise the minimum capital requirement to
\nbetween Rp 700 billion and Rp 1 trillion,\" Laksamana said.<\/p>\n
According to the existing capital requirement, a bank would
\nhave to increase its paid-up capital to at least Rp 150 billion
\nif it wanted to upgrade its status to a foreign exchange bank.<\/p>\n
Banks which already operate as foreign exchange banks,
\naccording to the existing capital requirement, are allowed to
\ngradually increase their paid-up capital to Rp 50 billion by
\nSeptember of this year, to Rp 100 billion by September, 1999 and
\nto Rp 150 billion by September, 2001.<\/p>\n
Previously, the capital requirement was Rp 10 billion for non-
\nforeign exchange banks and Rp 15 billion for foreign exchange
\nbanks.<\/p>\n
Laksamana said increasing the capital requirement would help
\ndomestic banks compete with foreign banks, many of which would
\nenter the country in the upcoming years, and would force smaller
\nbanks to merge.<\/p>\n
However, the government must equally impose the requirement on
\nforeign banks operating in the country, he said.<\/p>\n
According to bank financial records as of March 31, many
\nforeign exchange banks still could not meet the minimum capital
\nrequirement of Rp 50 billion, including several branches of
\nforeign banks. (das)<\/p>",
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