Banks remain unstable: Minister<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The country's banking sector remains in a weak condition despite
\nthe government's costly bailout program launched five years ago,
\naccording to State Minister of National Development Planning Kwik
\nKian Gie.<\/p>\n
\"After the costly effort on the part of the government to bail
\nthem out, the condition of our banks is still far from healthy.<\/p>\n
\"The reason they're surviving is because of the 'subsidy'
\nthey've enjoyed through the payment of interest and principal of
\nthe recapitalization bonds they hold,\" Kwik told legislators on
\nTuesday at a hearing with the House of Representatives Commission
\nIX on financial affairs.<\/p>\n
He cited as an example state Bank Mandiri, the country's
\nlargest bank, which as of September last year posted around Rp
\n5.1 trillion (about US$550 million) in net profit.<\/p>\n
\"But the profit was calculated after the government poured
\nsome Rp 15.1 trillion into the bank during the same period in
\ninterest payments for the recapitalization bonds held by
\nMandiri,\" Kwik added.<\/p>\n
The bank currently holds around Rp 140 trillion worth of
\nrecapitalization bonds.<\/p>\n
The government via the Indonesian Bank Restructuring Agency
\n(IBRA) issued some Rp 430 trillion worth of bonds to help finance
\nthe recapitalization of several ailing banks. Each year, the
\nstate budget pays a huge amount of interest to the recapitalized
\nbanks that hold the bonds. This is the largest and costliest
\nbank bailout in the country's history.<\/p>\n
The same applies to other recapitalized banks, including Bank
\nNegara Indonesia (BNI), Bank Rakyat Indonesia (BRI), Bank
\nInternational Indonesia (BII), Bank Danamon, Bank Niaga and
\nothers, Kwik went on.<\/p>\n
Kwik's remarks are the latest criticism on how the huge
\nbailout has turned out to be fruitless, as improvement in the
\nbanking sector remains slow.<\/p>\n
IBRA is in charge of restructuring the banks to turn them into
\nfinancially healthy institutions. But as the agency's mandate is
\ncoming to an end, most banks remain in an unhealthy condition.
\nThe agency was set up in early 1998 and was to complete its job
\nby the end of 2004. However, there are now plans to dissolve IBRA
\nby August 2003.<\/p>\n
Despite the fact that the intermediary role of the banks is on
\na rising trend from time to time, it's pace has yet to match the
\nlarge costs to the country in bailing them out of trouble in the
\nfirst place.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/banks-remain-unstable-minister-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
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