Best synergy for BCA<\/p>\n
Bank Indonesia's insistence that the four final bidders for
\nthe government's controlling stake in Bank Central Asia (BCA)
\ncomplete their dossiers for assessment in a fit-and-proper test
\nis crucial in the effort to make the transaction credible and
\nfair and to ensure that BCA's new owners have high credibility
\nand integrity in the banking industry.<\/p>\n
Thorough assessments of the bidders, the management and
\nbusiness plans they propose for BCA, however meticulous they may
\nbe, aim to ensure that BCA's new majority owners are trustworthy
\nand its management possesses high technical competence and
\nprofessional integrity.<\/p>\n
This requirement, more than anything else, is fundamental for
\na bank as a trust institution with fiduciary responsibilities.
\nThis also is a vital element of an effective banking supervision
\nsystem. No amount of prudential rules, not even such capable
\nsupervisors as those of the American Federal Reserve Bank, can
\nprevent bad banking practices if, in the first place, bank owners
\nor management are crooked.<\/p>\n
Experiences in most countries show that almost all bank
\nfailures were caused not by keen market competition nor by
\nprofessional incompetence, but by crooked, greedy bankers who
\ntried by all means to circumvent prudential rulings to advance
\ntheir own interests.<\/p>\n
It is therefore most imperative for the central bank not to
\nexpedite the fit-and-proper test despite delay after delay in the
\nfiling of all the necessary documents by bidders. The deadline
\npressures should not be allowed to compromise the thoroughness of
\nthe test.<\/p>\n
Passing the fit-and-proper test should precede all other
\nrequirements such as the viability of the business plan or the
\nbidding price. Without a highly capable management and the
\nsupport of highly credible shareholders, public confidence in BCA
\nwill not increase and its market credibility will continue to
\ndepend mainly on the government's blanket guarantee on bank
\ndeposits and claims like all other national banks do now.<\/p>\n
Ideally, the winning bidder should be investors who can
\nsimultaneously bring in synergy to BCA and offer a very high
\nprice to generate bigger revenues for the cash-strapped
\ngovernment. But it is rather futile now to insist on getting
\nsuch ideal investors, given the fragile condition of the banking
\nindustry, Indonesia's adverse political and economic condition
\nand the poor composition of the four final bidders.<\/p>\n
Only the Standard Chartered-led bidder consortium is close to
\nmeeting the basic requirements for highly credible shareholders
\nand highly capable management with an international reputation.
\nThe other three bidders are led by Indonesian business groups,
\nwho are virtually unknown within the banking industry.<\/p>\n
The small number and the poor qualifications of most of the
\nfinal bidders should jolt the government to the harsh reality
\nthat the country is still shunned by most foreign investors.
\nThe almost total lack of interest also shows that BCA is not
\nreally as solid and sound as many have claimed and investing in
\nthe banking industry is still highly risky in view of the adverse
\npolitical and economic condition.<\/p>\n
The two-phase tender process whereby the winning bidder will
\ninitially acquire only 30 percent with an option to take another
\n21 percent also makes potential investors uneasy, given the
\ngovernment's reputation of failure to meet its commitments.<\/p>\n
True, BCA is the jewel of the assets held by the Indonesian
\nBank Restructuring Agency. Yes, it is potentially a good bank
\nwith more than 8 million accounts, 800 branches, over 2,100 ATMs
\nand total assets of almost Rp 100 trillion (US$9.5 billion) as of
\nlast year.<\/p>\n
But one should not forget that Rp 60 trillion of the bank's
\nassets consist of bonds with a near total lack of liquidity that
\nwere issued by the government, which itself is groaning under
\nmountains of debt and whose sovereign risks are seen by
\ninternational credit rating agencies as quite high. The bank's
\nloan-to-deposit ratio is only about 17.5 percent, meaning that
\nits income still depends largely on the taxpayers' money (bond
\ninterest).<\/p>\n
It is precisely because of this condition and the fragility of
\nthe banking industry that BCA's new owners and management should
\nbe highly credible and highly competent in the view of the
\ninternational financial community and have a long-term vision for
\ndeveloping the bank.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/best-synergy-for-bca-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}