Decree on SME restructuring a risk to banks<\/p>\n
A'an Suryana, The Jakarta Post, Semarang<\/p>\n
The plan to issue a presidential decree on the restructuring of
\nbad debts owed by small and medium enterprises (SMEs) could
\ncreate serious problems for banks, according to experts.<\/p>\n
They said that if the government forced banks to offer hefty
\ndiscounts and lenient restructuring terms to bad debtors, SMEs
\nthat had been diligent in repaying their loans would also ask for
\nsimilar facilities, which in turn could undermine the financial
\ncondition of the banks.<\/p>\n
\"Good SME customers will feel that they are being treated
\nunfairly by the government. They struggle to pay off their loans,
\nbut at the same time delinquent SMEs may receive reductions,\"
\nHari Rahardjo Slamet, vice president for credit restructuring at
\nstate Bank Mandiri, told participants at a media gathering on
\nWednesday in Semarang, Central Java.<\/p>\n
Earlier reports said that President Megawati Soekarnoputri was
\nclose to signing the decree, which has been revised dozens of
\ntimes due to difficulties in reconciling interests among
\nconsenting parties.<\/p>\n
Initially, the Office of the State Minister of Cooperatives
\nand Small and Medium Enterprises proposed that SME debtors be
\noffered a 50 percent discount for a one-time cash settlement and
\n40 percent if they paid off their loans by installment within one
\nyear.<\/p>\n
The proposal was supported by Vice President Hamzah Haz. The
\npolicy was expected to resolve the Rp 39.6 trillion in
\noutstanding bad debts owed by SMEs.<\/p>\n
But the plan was strongly protested by bankers, who lobbied
\nthe Office of the Coordinating Minister for the Economy to reject
\nthe proposal.<\/p>\n
After nearly a year of wrangling, government sources say the
\nfinal draft of the presidential decree would not specify the size
\nof discount to be given to indebted SMEs, and it would be up to
\nindividual banks to design the restructuring terms for the
\ndebtors. This seems to be the result of the successful lobbying
\nby the banks.<\/p>\n
According to Hari, even before details of the presidential
\ndecree had been made public, some good SME debtors had already
\nstarted to ask for special restructuring terms for their debts.<\/p>\n
Meanwhile, Frans Mardi Hartanto, a former commissioner for
\nBank Danamon, concurred with Hari, saying that overly lenient
\nrestructuring terms would pose a serious threat to banks' balance
\nsheets.<\/p>\n
\"Such a policy would create huge financial burdens for the
\nbanks,\" he said, adding that a deterioration in the financial
\ncondition of banks would jeopardize the government's costly bank
\nbailout program.<\/p>\n
\"The banking sector does not need a general policy ... Each
\nSME needs different treatment. Let the banks manage this by
\nthemselves,\" he said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/decree-on-sme-restructuring-a-risk-to-banks-1447893297",
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