Banks 'closed by proper procedures'<\/p>\n
JAKARTA (JP): The government will not review the closure of 16
\ninsolvent banks because the measure was taken according to proper
\nprocedures, Minister of Finance Mar'ie Muhammad asserted
\nyesterday.<\/p>\n
Mar'ie, who delivered a government statement before the House
\nof Representatives' plenary session on the recent reform package
\nsupported by the International Monetary Fund (IMF), reaffirmed
\nthe government's determination to maintain stability and
\nconfidence in the rupiah.<\/p>\n
\"The government will implement its Nov. 1, 1997 decision, and
\nwill handle all consequences thereupon,\" Mar'ie told the House in
\nreferring to the bank closures.<\/p>\n
He noted that the 16 closed banks all had conditions deemed
\nnecessary for closure as their assets were insufficient to cover
\nliabilities, mainly from substantial bad debt.<\/p>\n
Because of bad debt, their income was insufficient to cover
\ncosts, giving rise to losses which increased from year to year.
\nAnd the growing losses spoiled the banks' equity and negatively
\naffected it, he said.<\/p>\n
According to Mar'ie, the banks' ability to mobilize funds also
\nweakened so they increasingly relied on the interbank money
\nmarket, which was short-term and carried high interest rates.<\/p>\n
On Nov. 1, the government closed the 16 ailing banks as part
\nof a reform package backed by the IMF to strengthen the financial
\nsector and restore confidence in the country's economy.<\/p>\n
Mar'ie contended that the government and Bank Indonesia, the
\ncentral bank, had followed various stages and processes over a
\nsufficient length of time before revoking the 16 banks' business
\nlicenses.<\/p>\n
\"But warnings and proposals for improvement issued by Bank
\nIndonesia received less than a positive response from the
\nmanagements of the respective banks,\" Mar'ie said.<\/p>\n
Last week, President Soeharto's son Bambang Trihatmodjo and
\nhalf brother Probosutedjo said the government had not warned them
\nbefore it closed their banks, Bank Andromeda and Bank Jakarta,
\nrespectively.<\/p>\n
Bambang even criticized the closure of his bank as a political
\nmove by Mar'ie to tarnish the name of the Soeharto family.<\/p>\n
Both Bambang and Probosutedjo, together with other
\nshareholders of the two closed banks, are suing Mar'ie and Bank
\nIndonesia Governor J. Soedradjad Djiwandono to have their banks
\nreinstated.<\/p>\n
A preliminary hearing on the case is scheduled for tomorrow at
\nthe Jakarta Administrative Court.<\/p>\n
\"Because the Republic of Indonesia is a law-abiding state, any
\nparty feeling adversely affected by this decision can pursue the
\nmatter through appropriate legal channels,\" Mar'ie said.<\/p>\n
Mar'ie repeated his call to the owners, management and
\nemployees of the closed banks to cooperate fully in the process
\nof liquidating the banks and to obey all rules and regulations.<\/p>\n
Bank Indonesia credit director Mukhlis Rasjid said yesterday
\nshareholders of the closed banks should quickly hold
\nextraordinary meetings to liquidate their banks.<\/p>\n
\"They have 20 days (since the revocation of the licenses for
\ntheir banks) to hold a shareholders meeting and to form teams to
\nliquidate their banks,\" Mukhlis said.<\/p>\n
Legislator Thomas Suyatno, who is also chairman of the
\nsupervisory board of the National Private Banks Association,
\nadmitted yesterday that the closure of the 16 banks had set off a
\nrun on several private national banks by depositors who
\ntransferred their accounts to state banks or foreign banks.<\/p>\n
But the run on deposits has now stopped, Thomas said.<\/p>\n
Thomas still considered it necessary for the government to
\nreassure the public that there would be no more bank closures in
\nthe near future.<\/p>\n
Mar'ie said it was important to make the Indonesian banks more
\nsound, which would also have a positive effect in helping
\nstabilize the rupiah.<\/p>\n
\"The government hereby reaffirms its intention to maintain
\nstability and confidence in the rupiah,\" Mar'ie said.<\/p>\n
Soeharto<\/p>\n
In a related development, President Soeharto summoned Mar'ie,
\nBank Indonesia Governor J. Soedradjad Djiwandono, Minister of
\nIndustry and Trade Tunky Ariwibowo and Coordinating Minister for
\nProduction and Distribution Hartarto yesterday to discuss the
\nlatest developments in the monetary sector.<\/p>\n
The President instructed them to take further steps to
\nstrengthen the rupiah and further stabilize its rate,
\nMinister\/State Secretary Moerdiono said after the meeting.<\/p>\n
\"The President also stressed the need for further easing of
\neconomic liquidity and credit for small businesses and
\ncooperatives and for a more concerted effort to bolster exports,\"
\nMoerdiono said.<\/p>\n
Mar'ie told the House session the multibillion package
\nsponsored by the IMF was necessary to discourage speculative
\nattacks on the rupiah and to support Indonesia's balance of
\npayments.<\/p>\n
Before the crisis hit Indonesia, the government financed the
\naccount deficit mostly with capital inflows through direct
\ninvestment, portfolio investment and debt.<\/p>\n
Now such inflows would be minimal, and such standby funds from
\nmultilateral institutions would be helpful to keep Indonesia's
\neconomy afloat, Mar'ie said.<\/p>\n
\"While national foreign exchange reserves are at a safe level
\nat this time, sufficient to cover five months of imports, it is
\nprudent that we take measures to prepare standby funds,\" he said.<\/p>\n
Indonesia obtained US$23 billion in loans from the IMF, the
\nWorld Bank, the Asian Development Bank and other sources to
\nsupport its economic reform package.<\/p>\n
Other countries that have agreed to provide standby loans on a
\nbilateral basis include Singapore with $5 billion, Japan $5
\nbillion, the United States $3 billion, Malaysia $1 billion and
\nBrunei $1.2 billion.<\/p>\n
Mar'ie said the government would continue to increase
\nliquidity and lower interest rates while maintaining economic
\nstability to stimulate the business sector.<\/p>\n
The head of the ruling Golkar faction at the House, Theo L.
\nSambuaga, commended Mar'ie's explanation of reforms before the
\nHouse plenary session.<\/p>\n
\"Mar'ie's explanation about the government's move to tackle
\nthe monetary crisis was very clear and comprehensive, and we
\nsupport it,\" Theo said. (das\/rid\/prb)<\/p>\n
Broadcast -- Page 2<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/banks-closed-by-proper-procedures-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }