Problem loans declining<\/p>\n
JAKARTA (JP): Indonesia's banking system has successfully
\nsurvived the recent financial stress brought on by high levels of
\nnon-performing loans, according to a report by Standard & Poor's.<\/p>\n
However, the Australian-based rating agency said yesterday
\nthat Indonesia's banking industry is underpinned by a potentially
\nvolatile developing economy.<\/p>\n
The Indonesian banking industry, therefore, continues to have
\nhigher risks attached to it than those in more developed
\neconomies, the agency says in its latest Asia-Pacific Banking
\nProfiles report.<\/p>\n
\"Problem loans have peaked and are slowly declining, while
\nmany banks have recapitalized and the number of participants is
\nstable,\" it says.<\/p>\n
Despite such improvements, Standard & Poor's remains concerned
\nabout the residual burden of non-performing assets at certain
\nbanks, loan concentration towards affiliates and large borrowers.<\/p>\n
The agency also expresses concern over a high exposure to
\noffice and condominium projects, undercapitalization of small
\nbanks, the potential threat of finance companies and over-rapid
\ngrowth of certain private banks.<\/p>\n
Local analysts have also given similar warnings to the
\ncountry's banking industry.<\/p>\n
Laksamana Sukardi, a former banker, said that the high
\nexposure to the textile-based industry could also cause problems
\nfor the banking industry, given the unfavorable condition in the
\nworld textile market.<\/p>\n
He said that merging between undercapitalized banks is needed
\nto strengthen the competitiveness of the country's crowded
\nbanking industry. But he warned that mergers between small banks
\nwould not be an appropriate solution because such a move could
\nonly result in the accumulation of bad debt problems.<\/p>\n
Non-performing<\/p>\n
The total banking sector's non-performing loan level decreased
\nto 11.6 percent of the total loans as of June 30 this year from
\nthe peak of 14.2 percent in late 1993.<\/p>\n
The progress, Standard & Poor's said, is attributable to
\nseveral factors, including strong economic growth, better focus
\nof bank management and the imposition of stricter prudential
\nrequirements by Bank Indonesia (the central bank).<\/p>\n
The burden of the non-performing loans has not fallen evenly.
\nState-owned banks, which make up almost a half of the industry,
\nhad problem assets amounting to 16.2 percent of their loans as of
\nJune 30.<\/p>\n
In particular, state-owned Bank Pembangunan Indonesia
\n(Bapindo) has a substantial number of problem loans which, if
\nexcluded, would improve the industry's non-performing loan
\naverage by roughly a fifth to 9.3 percent of total loans.<\/p>\n
\"Most major private banks appear to have evaded this plight
\nthrough tighter credit control,\" the agency said in a statement.<\/p>\n
Standard & Poor's said that Bank Indonesia's tighter banking
\nsupervision, supported by a firmer regulatory and accounting
\nframework, has improved the integrity and transparency of
\nfinancial information from banks, although the positive impact
\nwill not be fully felt for two or three years.<\/p>\n
Despite the improvements in overall banking activities, the
\nagency gives a \"vulnerable\" assessment to the country's nine
\nmajor private banks.<\/p>\n
Those banks are Bank Bali, Bank Central Asia, Bank Dagang
\nNasional Indonesia, Bank Danamon, Bank Internasional Indonesia,
\nBank Niaga, Bank Umum Nasional, Bank Lippo and Pan Indonesia Bank
\n(Panin Bank).<\/p>\n
The \"vulnerable\" label means that the capacity of those banks
\nto meet deposit and other financial obligations on a timely basis
\nis vulnerable to adverse economic conditions.<\/p>\n
Five state-owned banks -- Bank Bumi Daya, Bank Dagang Negara,
\nBank Ekspor Impor Indonesia, Bank Negara Indonesia 45 and Bank
\nRakyat Indonesia -- receive the adjective \"adequate\".<\/p>\n
\"Adequate\" indicates that the banks have an adequate capacity
\nto meet deposit and other financial obligations on a timely
\nbasis, but protection levels appear to be more susceptible to
\nadverse economic conditions.<\/p>\n
The rating agency calls the soundest banks \"strong\" and
\n\"satisfactory\", while the least sound banks are referred to as
\n\"inadequate\". (hen)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/problem-loans-declining-1447893297",
"image": ""
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