Soeharto orders banks to improve supervision<\/p>\n
JAKARTA (JP): President Soeharto yesterday ordered bankers,
\nwhose industry has been rocked by a multi-million dollar credit
\nscam, to make a concerted effort to improve internal supervision
\nand management to prevent making bad loans.<\/p>\n
"The Ministry of Justice, the Office of the Attorney General,
\nthe National Land Agency, the State Receivership Agency and
\nmonetary authorities should also cooperate to seek fair and swift
\nways to legally settle non-performing loan cases faced by the
\nbanking industry," Soeharto said at the opening of the 12th
\ncongress of the Association of Domestic Private Banks (Perbanas)
\nat the State Palace here yesterday.<\/p>\n
The opening ceremony of the two-day assembly, which got under
\nway yesterday afternoon at Hotel Horison in North Jakarta, was
\nattended by Bank Indonesia Governor J. Soedradjad Djiwandono,
\nPerbanas executives and a number of government officials. The
\nassembly, held every three years, is to elect new members of the
\nboard, to formulate programs for the 1994-97 period and to
\nimprove the association's statutes.<\/p>\n
Soeharto said efforts to improve the banking industry had to
\nbe undertaken because it is one of the country's key forces to
\nimprove the national economy and boost the generation of public's
\nfinances.<\/p>\n
"Such a job reflects the enormous responsibility that has been
\ngiven to the banking industry by the public. Their mission is,
\ntherefore, identical with social responsibility," he said.<\/p>\n
"I specifically urge all parties related to banking activities
\nto stick to ethical and efficient practice in managing the
\nindustry," he said.<\/p>\n
Momentous time<\/p>\n
In solving problems related to non-performing loans, the
\nbanking industry itself, in cooperation with the monetary
\nauthorities, should take systematic and transparent measures, he
\nsaid.<\/p>\n
The President's statement came at a momentous time, with the
\nbanking industry still reeling after the Bapindo scandal broke,
\ninvolving a fortune in bad loans involving the privately-run
\npetrochemical firm PT Golden Key. The debt accrued from their
\nborrowing money from the state-owned Bank Pembangunan Indonesia
\n(Bapindo) has reportedly reached Rp 1.3 trillion (over US$600
\nmillion). Due to the credit scam, a number of Bapindo officials
\nand Golden Key's founder, Eddy Tansil, are now being tried for
\ncivil and criminal violations.<\/p>\n
Minister of Finance Mar'ie Muhammad recently reported that the
\nnon-performing loans at the country's seven state banks swelled
\nby 360 percent within the past three years to over Rp 14.97
\ntrillion or around 21 percent of their outstanding loans as of
\nlast October.<\/p>\n
According to Bank Indonesia (the central bank), bad debts
\nalone from both state and private banks had reached some 3.5
\npercent of the outstanding loans amounting to some Rp 145.9
\ntrillion, as of last November.<\/p>\n
Many economic analysts have expressed concern that the
\nincreasing bad loans being discovered will affect the confidence
\nof overseas bankers in the Indonesian banking industry. Already,
\ntheir worst expectations are being played out.<\/p>\n
The New York-based Standard & Poor's credit rating agency
\nreported in its ASEAN Banking Profile that the Indonesian banking
\nindustry is now facing a period of financial crisis after the
\nbanking reforms introduced by the government in the late 1980s.<\/p>\n
Responding to the bad judgment, Soedradjad argued yesterday
\nthat the rating was invalid.<\/p>\n
"The assessment of Standard & Poor's is not valid because it
\nwas prepared by its banking group division, which is not in the
\ncapacity to make any rating," he told some 350 participants of
\nyesterday's assembly.<\/p>\n
Soedradjad said the banking group division has only a function
\nto collect banking data for the benefits of various investors who
\ntap its services under a contract, he added.<\/p>\n
He said he directly contacted the agency for clarification of
\nits unfair assessment on the country's banking industry.<\/p>\n
"Standard & Poor's rating authority is actually in the hands
\nof its sovereign division," he said.<\/p>\n
Take-off era<\/p>\n
Soedradjad argued that ups and down are normal for the banking
\nindustry, particularly in Indonesia, whose economy is now going
\nto take off.<\/p>\n
He said the country's banking industry is actually
\nexperiencing a rapid growth. Since the introduction of a
\nderegulatory measures in October 1988, the number of commercial
\nbanks has increased from 112 with 1,900 offices to 235 with 5,861
\noffices, in addition to 9,000 secondary banks. The total assets
\nof the country's banks also increased steadily from 74 trillion
\nto Rp 295 trillion.<\/p>\n
The central bank governor said the funds generated by banks
\nfrom the public also increased significantly, from Rp 38 trillion
\nto Rp 164 trillion. He added that the credits provided by banks
\ngrew from Rp 49 trillion to Rp 183 trillion.<\/p>\n
"You can see that, out of the Rp 164 trillion funds generated
\nfrom the public, around Rp 74 trillion was made by private banks
\nas of February this year," he said.(fhp)<\/p>",
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