Psst, have you heard...?<\/p>\n
The massive deposit withdrawals at Bank Central Asia (BCA),
\nIndonesia's largest private bank, during the weekend exposes once
\nagain the precarious condition -- if not the vulnerability -- of
\nour economy, and more specifically, of the banking system.<\/p>\n
The rush at BCA was sparked by unsubstantiated rumors that
\nbusiness tycoon Liem Sioe Liong, the bank's founder and majority
\nowner, had died, and that the bank was in deep trouble after the
\nclosure of its office in Singapore. Not only was Liem alive, as
\nit became clear when he appeared in TV newsclips that same Friday
\nnight, but on that same day, BCA announced its purchase of a
\nlarge stake at Danamon, another major private bank. In any case,
\nBCA has only a representative office in Singapore, and its
\nclosure, even if it was true, would have had no bearing at all on
\nits performance.<\/p>\n
But the fact that the feeblest of rumors triggered a massive
\npanic among BCA depositors calls for closer introspection by
\nbanks and the monetary authority on the low confidence the public
\nhas in the banking and economic systems. How else could such
\nrumors spread and gain currency so quickly among the public,
\nunless there was a crisis of confidence in the first place? These
\nare perhaps more important questions to address than the
\nquestions of who started these rumors, and what motivated them?<\/p>\n
As Indonesia moves more and more into a market-based system
\nwhich is fully integrated with the global economy, its stock and
\ncurrency markets are becoming more prone to rumors. In such a
\nsystem, rumors often drive markets up and down.<\/p>\n
But the market usually has a way of correcting itself quickly
\nas soon as it becomes known that the rumors are unfounded --
\nalthough undoubtedly some people in the meantime make a big
\nkilling from the volatility. In the United States and other
\ndeveloped economies, unsubstantiated market rumors rarely have
\nany impact on the real sector of the economy because they are
\nquickly countered, and markets adjust themselves just as quickly.<\/p>\n
The catchword in all these economies is transparency -- in the
\nmarket, in the economy and banking systems, and in the corporate
\nworld -- which prevents wild rumors from ever gaining significant
\ncurrency. Transparency is lacking in Indonesia.<\/p>\n
The Indonesian markets have already been tested several times
\nin the past two years by rumors about the deteriorating health of
\nPresident Soeharto. Each time, the market survived and recovered
\nas soon as the presidential palace announced the real condition
\nof the head of state.<\/p>\n
These incidents, however, should have served as warnings of
\nthings to come as Indonesia became more integrated with the
\nglobal economy. Some rumors have been known to be destructive, as
\nwe ourselves have learned from the current monetary crises.<\/p>\n
Market volatility is the downside of the economic system that
\nwe have come to adopt. But it is no use blaming rumors. No one
\ncan stop them. The only way to counter rumors or minimize their
\nimpact is by playing the game to the fullest, and that includes
\nmaking the system as transparent as possible.<\/p>\n
Public confidence in the monetary system can only be earned by
\nbecoming fully transparent, instead of being more secretive, no
\nmatter what the law says about banking secrecy. Transparency is
\neven more imperative in this Internet age -- where all kinds of
\ninformation, whether true or false, credible or not -- flow
\nfreely and compete for people's attention.<\/p>\n
The panic among BCA depositors this weekend was not only
\nfueled by the fresh rumors. Since the government announced the
\nclosure of 16 private commercial banks on Nov. 1, rumors have
\nbeen buzzing that BCA had bailed out some of the banks originally
\nearmarked for liquidation by the government. BCA never confirmed
\nthese rumors. Since it is not a publicly-listed bank, it is under
\nno obligation to disclose such moves. But as the largest private
\ncommercial bank, it has a moral duty to be more transparent to
\nthe millions of people who have entrusted their money with the
\nbank.<\/p>\n
The closure of the 16 banks have already caused enough jitters
\namong depositors of other banks. It only takes the feeblest of
\nrumors to shake their confidence.<\/p>\n
It is not important to know who started these rumors and for
\nwhat purpose, even if these are still possible to determine. The
\nchief lesson from this weekend's incident is that unless banks
\nopen up their management, the next rumor could be destructive for
\nthe banks, the depositors, and for the rest of the economy. In
\nshort, transparency is in the interest of everyone.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/psst-have-you-heard-1447893297",
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"sponsor": "Okusi Associates",
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