Govt's liquidity loan policy confusing<\/p>\n
The government has extended by one year the deadline for the
\nrepayment of liquidity support loans to ailing banks. Lawyer
\nTodung Mulya Lubis looks at the legal impact of the delay.<\/p>\n
Question: What is your reaction to the government's
\ninconsistency over deadlines for a number of banks to repay the
\nliquidity support loans that they received from Bank Indonesia,
\nthe central bank?<\/p>\n
Mulya: By extending the deadline for the loan repayment from
\nSept. 21, 1998, to five years' time and revising it again to one
\nyear's time, the government has confused everyone, particularly
\nbankers and investors interested to acquire shares in the debtor
\nbanks, whose operations are now being suspended or taken over by
\nthe Indonesian Bank Restructuring Agency (IBRA).<\/p>\n
Sultan Hassanal Bolkiah of Brunei and Citibank of the United
\nStates, for example, reportedly have shown their interest in
\nbuying Bank Central Asia shares, while ABN Amro of the
\nNetherlands wants to acquire shares in Bank Danamon.<\/p>\n
From the legal perspective, we can raise the question of
\nwhether the government, in setting the new deadline (after
\nrealizing that the banks could only provide about Rp 1 trillion
\n(US$95,000) in cash, and the remainder would be paid in assets),
\nactually wants to punish the bankers or to recover the loans
\nalready extended to them.<\/p>\n
If the government wants to punish delinquent bankers, it will
\nbe easy for it to bring those who have violated regulations on
\nlegal lending limits and abused the use of their support
\nliquidity loans to court and then imprison them. But the bankers
\nwill most likely let themselves to be sent to jail and, as a
\nconsequence, the government will never be able to recover all of
\nthe loans, totaling more than Rp 120 trillion.<\/p>\n
But if the government wants to recover all the loans, even one
\nyear will not be enough for the debtor banks to sell their assets
\nat proper prices on account of the severe economic crisis.<\/p>\n
I think punitive measures should be taken only as a last
\nresort when bankers do not show a serious commitment to repaying
\ntheir debts. The most important thing is recovering the funds
\nwhich are badly needed to finance the restructuring of the
\nbanking industry and a more general economic recovery.<\/p>\n
Q: How could the government be so inconsistent about introducing
\nbanking policies?<\/p>\n
M: Basically because the government is politically weak and the
\nIBRA officials have no clear vision and perspective on how to
\novercome banking problems.<\/p>\n
I wonder whether the changes of policy have been caused by
\npolitical pressures or by the domination of foreign experts at
\nIBRA.<\/p>\n
Q: Do you believe that the ministers or IBRA officials have no
\ncourage to deal with banking executives or owners like Bambang
\nTrihatmodjo and Sudwikatmono (a son and cousin of former
\npresident Soeharto)?<\/p>\n
M: There should be no reason for the government, which currently
\nneeds legitimacy from the people, to be afraid of dealing with
\nconglomerate owners who were politically and economically strong
\nduring the Soeharto administration.<\/p>\n
A strict stance against such conglomerate owners is actually a
\nsource of legitimacy for the government.<\/p>\n
Q: Is there any legal basis for the government to punish bankers
\nwho fail to repay the liquidity loans by the deadline but have
\nnot violated any banking regulations, such as the legal lending
\nlimit?<\/p>\n
M: I think the government, when pouring liquidity loans into
\nbanks rushed by depositors after the liquidation of 16 insolvent
\nbanks in November 1997, did not set any deadline for the
\nrepayment of the loans or sanctions against defaulters. However,
\nthe banks must repay their debts and they have signed agreements
\nwith the Attorney General's Office, ceding their assets as
\ncollateral for the repayment -- even though there is a difference
\nbetween the banks and IBRA on the value of the assets.<\/p>\n
Q: Why has the government assigned the Attorney General's Office,
\ninstead of IBRA to collect the liquidity loans?<\/p>\n
M: That is because there is a controversy over whether the case
\nshould be subject to the criminal code or civil law. As some
\nparties consider the case a criminal one because it involves
\nstate funds, the debt collection has been assigned to the
\nAttorney General's Office. However, the Attorney General has
\nappointed the deputy attorney general for civil and state
\nadministrative affairs, not the deputy attorney general for
\nspecial crimes, to deal with the debt collection. This means that
\nthe Attorney General's Office itself regards the case as subject
\nto civil law.<\/p>\n
I myself consider the case a civil affair because it involves
\nrelations between creditor and their debtors under an
\nextraordinary situation -- the severe economic crisis. (riz)<\/p>",
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"sponsor": "Okusi Associates",
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