Banking restructuring still a long way off<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Despite years of painful and costly restructuring, the
\ncountry's banking sector has yet to emerge as a fully sound
\nfinancial system and remains vulnerable to shocks, banking
\nexperts said on Friday.<\/p>\n
The massive restructuring work carried out since the late
\n1990s financial crisis is still in its early stages and focused
\nmainly on improving banks' financial indicators, while little has
\nbeen done to restructure banking operations such as mechanisms
\nfor risk management and internal control, the experts said.<\/p>\n
\"Improving the operational aspects will be the center of the
\nnext phase of the banking restructuring process, which will
\nensure that the financial health indicators can be sustained in
\nthe long run,\" Muliaman Hadad, head of Bank Indonesia's division
\non financial system stability, said at a seminar here.<\/p>\n
The seminar, Post-IMF Efforts to Restructure and Salvage the
\nBanking Sector, featured speakers such as Indonesian Bank
\nRestructuring Agency (IBRA) deputy chairman Sumantri Slamet, Bank
\nNegara Indonesia commissioner Dradjad Wibowo and Bank Mandiri
\nvice president I Wayan Pugeg.<\/p>\n
Muliaman said the reason behind the central bank's launch of
\nthe Indonesian Banking Architecture Blueprint was to strengthen
\nthe sector with regard to its asset structure, internal and
\nexternal controls, including the ability to conduct proper risk
\nassessments, and its ability to play an intermediary role.<\/p>\n
The program lays out a policy direction for the banking
\nsector, to be implemented in stages over the next 10 years to
\neventually create a sound, strong and efficient banking system.
\nThis assumes that a resilient banking system should form a key
\nelement in promoting economic growth and supporting financial
\nsystem stability.<\/p>\n
All of the speakers at the seminar shared Muliaman's view that
\nthere were still lots of work needed to improve the banking
\nsector as a whole, not just its financial condition.<\/p>\n
Dradjad of Bank Negara Indonesia said that although some
\nindicators to measure a bank's financial shape -- such as capital
\nadequacy ratio and non-performing loans -- had significantly
\nimproved since the start of the restructuring process, recent
\nbanking frauds exposed poor control mechanisms and risk
\nassessment skills.<\/p>\n
\"In fact, it was those things that were the main reason why we
\nhad the banking crisis in the first place.<\/p>\n
\"It's clear that a failure to address those operational
\naspects may well lead us to another crisis,\" said Dradjad, who is
\nalso a director at the Institute for the Development of Economics
\nand Finance.<\/p>\n
Dradjad was referring to recent disclosure of lending scams at
\ntwo of the country's banking heavyweights, Bank Negara Indonesia
\nand Bank Rakyat Indonesia, in what he said were early warnings to
\nbankers of how vulnerable the sector still was.<\/p>\n
Indonesia embarked on a massive bank restructuring program in
\nthe late 1990s, spearheaded by IBRA, to help out the country's
\nailing banking sector, which was severely hit by the devastating
\ncrisis. The program cost about Rp 450 trillion worth of
\nrecapitalization funds, making it the costliest bank bailout
\namong crisis-hit countries in the region.<\/p>",
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