'Incestuous' lending occurs in some RI banks: Analyst<\/p>\n
JAKARTA (JP): A banking analyst from the New York-based rating
\nagency Thomson Bankwatch Inc. says that Indonesia's private
\ncommercial banks, mostly controlled by diversified business
\ngroups, may run into credit-problems due to rampant \"incestuous
\nloans\".<\/p>\n
\"There are potential problems among the country's private
\ncommercial banks because a significant number of them have been
\nextending loans to businesses controlled by the banks'
\nshareholders,\" Phillipe F. Delhaise, the president of the Asian
\ndivision of the rating agency, told The Jakarta Post yesterday.<\/p>\n
\"In the case of such incestuous loans, we can never be sure
\nwhether those loans have been extended under proper credit-
\nanalysis,\" he said during a break in a workshop evaluation on
\ncredit risk analysis held by Thomson Bankwatch here.<\/p>\n
Thomson has rated the Indonesian banking system as a whole and
\nhas individually scrutinized 39 of the country's private and
\nstate banks.<\/p>\n
After the government launched a major banking reform in 1988,
\nthe number of private commercial banks in Indonesia, one of the
\nfastest growing economies in the world, has more than doubled to
\n240.<\/p>\n
Some banking analysts, including Kwik Gian Gie and Laksamana
\nSukardi, however, fear that most of these new commercial banks
\nlack professionalism and prudence because, in frequent cases,
\nthey are controlled by diversified business groups without prior
\nbanking experience.<\/p>\n
Analysts often cite the cases of Bank Duta and Bank Summa,
\nwhich collapsed because of poor internal control and excessive
\ninterference by dominant shareholders.<\/p>\n
Bank Duta, owned by the Supersemar, Dakap and Dharmais
\nfoundations, suffered US$419.63 million in losses from foreign
\nexchange trading in 1990.<\/p>\n
Bank Summa, which was owned by the Soeryadjaya family, was
\nclosed down in 1992 because of dubious bad loans of around $500
\nmillion.<\/p>\n
Delhaise yesterday stated his agreement with the analysis on
\nthe potential danger of such \"incestuous loans\".<\/p>\n
He declined, however, to elaborate on the exact magnitude of
\nthese potential problems and to identify the supposedly troubled
\nprivate banks.<\/p>\n
\"What I can say is only that private commercial banks whose
\nownerships are not dominated by one single group, but evenly
\nspread between a range of shareholders, will have less problems
\ncaused by these incestuous loans,\" Delhaise said.<\/p>\n
\"In some cases, some smaller banks are in better shape than
\nthe bigger ones in relation to these problems,\" he said.<\/p>\n
Bad debts<\/p>\n
Bank Indonesia, the central bank, recently announced that the
\nlevel of bad debts in the country's commercial banks rose to 3.97
\npercent of their outstanding credits, standing at about $85.88
\nbillion as of January, up from 3.88 percent as of September 1994.<\/p>\n
The level of bad debts in state banks alone, which control
\naround 50 percent of the lending market, reached a higher level
\n-- 5.8 percent or about Rp 6.1 trillion -- as of January.<\/p>\n
Soedradjad Djiwandono, the governor of Bank Indonesia,
\ndismissed any suggestion that bad debts were adversely affecting
\nthe banking industry, saying that the ratio remained within
\ntolerable limits.<\/p>\n
Delhaise also said yesterday that the international financial
\ncommunity believed that the Indonesian government would always
\nsupport state banks, regardless of their loan problems.<\/p>\n
\"We are confident that, because of guaranteed government
\nsupport, state commercial banks will still have sound credit
\nworthiness even though they have negative equities,\" he said.<\/p>\n
\"Of course, such support will not be there for the private
\nbanks. If they have negative equity, they can really go under,\"
\nhe said. (hdj)<\/p>",
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