Official backs sweeping power for banking agency<\/p>\n
JAKARTA (JP): A key government official has defended the new
\nbanking bill vesting the Indonesian Bank Restructuring Agency
\n(IBRA) with controversial special powers, arguing they are
\nimperative to salvage the chaotic banking sector.<\/p>\n
Director General of Financial Institution at the Ministry of
\nFinance Susiati B. Hirawan said on Sunday that the government
\ndeliberately provided IBRA with the authority to prevent the
\nagency's decisions from being challenged in court.<\/p>\n
\"If IBRA has to get caught up with courts, it's no longer
\ncrisis management. There has to be a special power because we're
\nin a crisis and we need to move fast,\" she told reporters in a
\ndiscussion on the new banking bill which is being proposed to the
\nHouse of Representatives (DPR).<\/p>\n
The bill, an amendment to the 1992 Banking Law, will be
\ndebated by the House over the next four weeks. The legislature is
\nslated to give its decision on Oct. 16.<\/p>\n
Controversy has surrounded the special power for IBRA, which
\nis basically given carte blanche in its efforts to rehabilitate
\nbanks under its supervision even when its actions contravene
\nexisting laws.<\/p>\n
\"I hope the DPR can understand this because we're in a crisis
\nsituation,\" Susiati said. She added that IBRA's operations would
\nbe made transparent.<\/p>\n
Some members of the House have opposed clause 37A extending
\nthe special power to IBRA, especially its asset management unit
\n(AMU).<\/p>\n
Under the government's bank restructuring plan, IBRA is
\nexpected to complete rehabilitating ailing banks under its
\nsupervision by the end of this year, while AMU will start
\nabsorbing the banks' nonperforming assets and selling them on the
\nmarket early next year.<\/p>\n
Dozens of private banks are under the supervision of IBRA for
\ndrawing on Bank Indonesia's liquidity support equivalent to more
\nthan 200 percent of their capital.<\/p>\n
The liquidity support has been provided by the government
\nsince January to help the banks in facing runs on their deposits
\nin the wake of an exhaustion of confidence in the sector.<\/p>\n
The agency has also taken over seven large private banks which
\nreceived liquidity support equivalent to more than 500 percent of
\ntheir capital.<\/p>\n
Three of the banks were suspended last month, while the other
\nfour were nationalized, including Bank Central Asia and Bank
\nDanamon, two of the country's largest private banks.<\/p>\n
The banks have been given until Sept. 21 to return the
\ncredits.<\/p>\n
The government also closed down seven other banks in April
\nwhich also received huge liquidity support.<\/p>\n
Susiati said that AMU's first priority would be to absorb and
\nsell the nonperforming assets of the banks in IBRA's hands.<\/p>\n
\"The proceeds from the asset sale will be used to repay Bank
\nIndonesia's liquidity support,\" she said.<\/p>\n
The central bank has channeled more than Rp 140 trillion
\n(US$12 billion) in liquidity support.<\/p>\n
\"For non IBRA-banks, they can either form their own asset
\nmanagement company or ask for the help of AMU.\"<\/p>\n
Bank Indonesia director Achwan warned that some studies
\npointed found that asset management firms established in Latin
\nAmerica to deal with that region's banking crisis had failed.<\/p>\n
\"That's why we're still studying what are the best
\nalternatives,\" he said on the same occasion.<\/p>\n
The banking sector's nonperforming loans are estimated to
\nreach 50 percent of total outstanding loans of more than Rp 600
\ntrillion. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/official-backs-sweeping-power-for-banking-agency-1447893297",
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