Restrictions on errant bankers welcomed<\/p>\n
Tony Hotland, The Jakarta Post, Jakarta<\/p>\n
Banking observers supported Bank Indonesia's decision to bar
\nformer owners of insolvent banks, who in the past had violated
\nbanking rules, from having a controlling share in any bank within
\nthe next 20 years and urged the central bank to impose a stricter
\ntest of suitability.<\/p>\n
Institute for Development of Economics and Finance (INDEF)
\neconomist Aviliani told The Jakarta Post that the decision was a
\ngood move for the banking sector, confidence in which had been
\nhanging by a thread since the 1997 economic crisis.<\/p>\n
"Banking is a matter of developing public trust, and it will
\ntake forever to regain the same trust. They've ruined their own
\nreputation with their mistakes," Aviliani said.<\/p>\n
She said that the ban was indeed necessary because otherwise
\nerrant bankers would repeat the same mistakes should they re-
\nenter the industry as major players.<\/p>\n
She cautioned that those bankers prohibited from becoming
\nmajor shareholders in banks could invest money through third
\nparties.<\/p>\n
"They could, as has been the practice lately, become a
\nshareholder but under other people's names," said Aviliani.<\/p>\n
Therefore, she asserted, the central bank should impose a test
\nof suitability for current shareholders of banks to provide an
\nassurance of their capability.<\/p>\n
"The test must include an assessment of professionalism and
\nthe track record of the owners and management," said Aviliani.<\/p>\n
Bank Indonesia recently issued regulation No.5\/25\/2003 on the
\ntest, which bans errant former owners of troubled or closed-down
\nbanks from having a controlling stake in any bank within the next
\n20 years.<\/p>\n
The former bank owners violated legal lending limit
\nregulations by channeling most of the money from their banks to
\naffiliated business groups. This created trouble for the banks
\n(some of which were closed down following the late-1990s
\nfinancial crisis) and threatened the banking system in general
\nwith collapse. The government was forced to inject a huge amount
\nof public money to bail out the banks and maintain confidence in
\nthe banking industry.<\/p>\n
Although some of the former bank owners repaid their debts to
\nthe government, which plans to release these particular bankers
\nfrom their past banking crimes, the central bank's rule would
\nprohibit them from controlling a bank for some considerable time.<\/p>\n
Former bank owners deemed as cooperative by the authorities in
\nsettling their obligations to the government include
\nSudwikatmono, Anthony Salim, Ibrahim Risjad, The Nin King,
\nHendra Liem, Hashim S. Djojohadikusumo, Njoo Kok Kiong, Honggo
\nWendratmo, Suparno Adijanto, Andy Hartawan, Ganda Eka Handria,
\nPhilip S. Widjaja and Mulyanto Tanaga.<\/p>\n
Controlling shareholders include those who possess,
\nindividually or in a group, a minimum 25 percent shareholding and
\ndirectly run the management or can intervene in a bank's
\ndecisions.<\/p>\n
Meanwhile, chief economist of state-owned Bank Mandiri Martin
\nPanggabean said that the central bank's move was nothing unusual,
\nbut was logical and to be expected.<\/p>\n
"I think this is just an attempt by Bank Indonesia to avoid
\ncreating a controversy. If the central bank were to allow those
\nbankers (to have a major share), the public would then question
\nits credibility," he said, adding that the policy was consistent
\nwith the bank's need for prudence.<\/p>\n
With regard to the possibility of entrusted money, Martin said
\nthat Bank Indonesia had to be very smart in controlling and
\ntracing where such money came from.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/restrictions-on-errant-bankers-welcomed-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}