Liquidation of insolvent banks needed: Kwik<\/p>\n
The recent liquidation of 16 banks has sacrificed the
\ninterests of depositors. Economist Kwik Kian Gie discusses the
\nnecessity of punishing those responsible for the bankruptcy of
\nthe banks.<\/p>\n
Question: Do you agree with the liquidation of the banks?<\/p>\n
Kwik: I have been suggesting the reform of our banking sector
\nbecause it has been decaying.<\/p>\n
So, we have to adopt a routine program for a certain period of
\ntime to liquidate insolvent banks until all the existing banks
\nare solid. That means the government should not say that after
\nthese 16 banks, there will be no other banks liquidated.<\/p>\n
The liquidation has made society extraordinarily anxious. What
\nwill happen if bank liquidation is conducted regularly?<\/p>\n
Bank liquidation will never create anxiety as long as
\ndepositors can immediately recover all their money.<\/p>\n
Where should the refund money come from?<\/p>\n
It should be the people's money collected from taxes. So the
\nrepayment of deposits in liquidated banks should come from the
\nstate budget. Banking reforms can be planned for years in the
\nfuture, with a target that the sector, for example, should become
\nsolid after three years.<\/p>\n
Is it fair to use taxpayers' money for such a bailout?<\/p>\n
Experience in the United States, where taxpayers are aware of
\ntheir rights, show that such a payment is acceptable because
\ntaxpayers understand that the economy will be ruined if the
\nbanking sector, the main source of liquidity, is damaged.<\/p>\n
But there is a big \"but\". Those who have caused loans to go
\nbad or corrupted funds from banks must be really punished. As far
\nas I know, bad loans in the United States reached US$380 billion
\na few years ago in the savings and loans scandal.<\/p>\n
But taxpayers accepted the use of their fund for a bailout
\nbecause they knew that those who were guilty were chased,
\ninvestigated and punished. Even a son of then U.S. president
\nGeorge Bush, Neil Bush, was punished.<\/p>\n
I am sure Indonesian taxpayers would not object to the use of
\ntax money to improve the health of the banking sector, if the
\ngovernment enforced the law strictly and transparently.<\/p>\n
Isn't the government using Rp 2.3 trillion of the people's
\nfund for the repayment of depositors' savings of up to Rp 20
\nmillion each in the liquidated banks?<\/p>\n
Yes. But the government does not investigate and punish those
\nresponsible for the bankruptcy of the banks.<\/p>\n
What is strange and unfair is that depositors are most
\nunlikely to recover their savings beyond Rp 20 million. Minister
\nof Finance Mar'ie Muhammad once told the House of Representatives
\nthat one of the reasons for the liquidation was that their assets
\nare far less than their liabilities.<\/p>\n
That means the sales of the liquidated assets will not be
\nadequate to repay all the deposits. Many depositors will lose
\ntheir savings forever and many small-scale entrepreneurs suddenly
\nwill not be able to continue their businesses due the loss of
\ntheir working capital. Many of them are suffering from stress and
\nsome have committed suicide or gone mad. The government is cruel
\nfor having sacrificed them, while there is no sign that the
\nauthorities will investigate those responsible.<\/p>\n
Why has the government done this?<\/p>\n
I have the impression that the government has been pressed by
\nthe International Monetary Fund to take real action in reforming
\nthe banking sector as soon as possible. The government had for
\nquite a long time known, recognized and admitted the increase of
\nbad loans and the rotting of the banking industry. I had written
\nfor Kompas 13 times since May 1993 about bad loans and the
\nrotting of the banking industry, as well as the way to solve the
\nproblems. The IMF was cruel if it praised the government's move,
\nsacrificing many people who have committed no wrong.<\/p>\n
You keep saying that depositors are not in the wrong.
\nShouldn't they be responsible for selecting their banks?<\/p>\n
Not at all. Until the date of liquidation, the banks were
\nstill holding operational licenses from the government. The
\nexistence of various regulations and supervision by Bank
\nIndonesia made the depositors sure that their banks were safe.<\/p>\n
Furthermore, how could depositors evaluate the healthiness of
\ntheir banks if the format of the financial reports made it
\nimpossible for them to analyze them and the banks violated the
\nrequirement on the frequency of report publication? Financial
\nreports, even though they were audited by public accountants,
\ncould be manipulated if the leaders of the banks provided false
\nrecords to the accountants and signed representation letters.<\/p>\n
Is IMF aware about what you have described?<\/p>\n
As the IMF has praised the way the Indonesian monetary
\nauthorities liquidated the banks, I think the IMF does not care
\nmuch about the fate of the depositors, who are not their national
\nfellows and not of their concern.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/liquidation-of-insolvent-banks-needed-kwik-1447893297",
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