Executive accuses local private banks of cheating<\/p>\n
JAKARTA (JP): Some of the city's local private banks often
\ntransfer their bad loans into current loans to secure an improved
\nperformance through "cheating" practices instead of restructuring
\nthe loans, an executive of a leading bank rating agency said.<\/p>\n
The president of Thomson Bankwatch Asia, Philippe F. Delhaise,
\nsaid that to reduce the figures of their bad loans, some banks
\njust lend more to the same borrowers or other companies belonging
\nto the borrowers so that they can service the bad debts.<\/p>\n
"It is not restructuring but cheating, and it is done a lot in
\nIndonesia," Delhaise told The Jakarta Post in a break at a two-
\nday seminar on Asian Banking Risk Analysis in the city yesterday.<\/p>\n
The seminar was organized by the Thomson Bankwatch Asia, an
\naffiliate of the New York-based Thomson Bankwatch which claims to
\nbe the world's largest bank rating agency, with the number of its
\nclients reaching more than 1,000 financial institutions in over
\n50 countries. It currently rates 15 leading Indonesian banks.<\/p>\n
When asked, Delhaise said that there are several ways to
\ncontrol cheating practices. However, he declined to elaborate the
\nways. "It is very much in the hand of the management."<\/p>\n
He predicted that local private banks which have enjoyed a
\nvery rapid annual growth rate of over 50 percent during the past
\nseveral years may run into credit problems in the next two to
\nthree years.<\/p>\n
"It sounds difficult for any bank in the world to grow by 50
\npercent or 60 percent a year and do the right things," Delhaise
\nsaid.<\/p>\n
"In Jakarta, many banks grow by 50 percent for several years.
\nIt is bound to create problems in how the banks are run, not to
\nmention the problems linked to the quality of credits," he
\ncontinued.<\/p>\n
According to Bank Indonesia, the central bank, bad loans at
\nlocal private commercial banks reached Rp 1.67 trillion (US$725
\nmillion at the current rate) as of last June, or 17 percent of
\nthe total bad loans of the country's commercial banks. These
\nstood at Rp 9.97 trillion.<\/p>\n
The largest portion of bad loans occurred in the seven state-
\nowned banks with Rp 7.32 trillion of combined bad loans, or 73.4
\npercent of the total bad loans.<\/p>\n
Handling<\/p>\n
Delhaise also expressed his concern over a slow handling of
\nthe huge bad loans at state banks. However, he did not blame Bank
\nIndonesia for it.<\/p>\n
"Bank Indonesia is prevented from doing a good job because of
\nthe circumstances in the country... It's a pity because the
\ncentral bank is not given more help to solve the problems,
\nespecially the problems of bad loans at state banks," he said.<\/p>\n
While some bad debts clearly made to unhealthy companies, much
\nnon-servicing of debts may be caused by unwillingness rather than
\ninability to pay, he said.<\/p>\n
Delhaise suggested that the government should be tougher in
\nforcing the borrowers, who are able but unwilling to pay their
\ndebts, to fulfill their obligations to state banks.<\/p>\n
He also called on the government to put an end to rampant
\n"incestuous" credits extended by a number of private commercial
\nbanks, especially those controlled by diversified business
\ngroups.<\/p>\n
He acknowledged that the central bank had issued a ruling for
\nthe country's commercial banks in extending loans to businesses
\naffiliated to them. However, a number of banks just disregard the
\nrules.<\/p>\n
According to Bank Indonesia's ruling on legal lending limits,
\ncredits extended to companies or individuals with special
\nrelationships with a bank may not exceed 12.5 percent of the
\nbank's capital.<\/p>\n
"It is very very dangerous. In case there is a downturn in the
\neconomy or even a slowdown, there is a great potential to turn
\nthose credits into bad debts," he said. (rid)<\/p>",
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