State banks' subterfuge<\/p>\n
Even in this supposed reform era, Indonesian state banks,
\nnotoriously known for corrupt and collusive lending practices,
\nare never short of tricks to defend the vested interests of their
\nmanagements and crony customers, many of whom have powerful
\npolitical connections. With negative capital, all are now
\ntechnically bankrupt, and are only able to remain open with an
\ninjection of funds guaranteed by the government. Despite this
\nsupport, the banks have aggressively lobbied to take back more
\nthan Rp 100 trillion (US$12.5 billion) worth of bad assets or
\nnonperforming loans (NPLs) already transferred to the asset
\nmanagement unit of the Indonesian Bank Restructuring Agency
\n(IBRA) in return for recapitalization funds from the government.<\/p>\n
For now, the state banks have only succeeded in taking back a
\nsmall portion of their NPLs from IBRA. However, this may only be
\nthe first step in a larger scheme. This clumsy approach only
\nreinforces the public's lingering suspicion that the government
\nis not serious about pursuing the large debtors who are partly
\nresponsible for bankrupting the state banks.<\/p>\n
Widigdo Sukarman, president of publicly listed Bank BNI, one
\nof the seven state banks, claimed, to the disgust of most
\nanalysts, that state bank managements were better able to recover
\nthe bad credits, because they knew their customers. Widigdo,
\nchairman of the Consultative Forum of State Banks, even went as
\nfar to indirectly blame the central bank for most of the NPLs. He
\nargued that many of the NPLs would not have ended up in the
\ncategory had it not been for the punitively high interest rates.<\/p>\n
High interest rates, especially since April, 1998, have added
\nto the woes of businesses, and contributed in part to devolving
\nthe viability of loans. But this point oversimplifies the
\nproblem. It has long been common knowledge that state banks have
\nbeen squeezed by those in power as cash cows for their business
\ninterests. Conglomerates willing to share the spoils with bank
\nmanagements, easily obtained big loans without proper assessment
\nof their businesses and collateral put up as security for their
\ndebts. The list of the 50 biggest debtors of state banks speaks
\nvolumes about the widespread, politically directed and collusive
\nlending sprees.<\/p>\n
Therefore, nobody is fooled by the state bankers' subterfuge
\nto conceal their corrupt and collusive practices. Bankers want to
\ntake back the NPLs from IBRA, but not in good faith to recover
\nthe debts. They are simply bent on continuing their collusions
\nand hiding issues of malpractice behind the NPLs. The state
\nbankers know that IBRA -- which is managed mostly by highly
\nreputable professionals and foreign consultants, under the close
\nsupervision of the International Monetary Fund -- cannot easily
\nbe compromised with regard to the management of the bad debtors.
\nIBRA also is subject to more stringent transparency provisions
\nthan state banks, which often try to hide their crimes behind
\nbanking secrecy provisions.<\/p>\n
Minister of Finance Bambang Subianto who, as the director
\ngeneral for banking and financial institutions in the early 1990s
\nmust have known the inside operations of state banks, clearly
\nstated on Thursday that NPLs of the state banks would remain
\nunder IBRA. But IBRA deputy chairman Eko S. Budianto said later
\non Friday that individual NPLs of less than Rp 25 billion would
\nbe transferred back to the management of state banks.<\/p>\n
The backtrack is very discouraging. The government must have
\nknown that the unloading of bad assets from ailing banks to an
\nasset management company -- in this case IBRA -- aims primarily
\nto enable the banks being restructured to focus their resources
\non managing good assets which, given the inimical macroeconomic
\nconditions, could easily slip into bad credits.<\/p>\n
Handling of bad loans requires skills that are usually not
\nprovided in a bank. Personnel involved in such activities include
\nreal estate specialists, liquidation experts and people with
\ninsights into various industrial sectors. The debt recovery
\nprocess is quite complex, and involves the conversion of the bad
\nloans into assets, real or financial, then the restructuring of
\nthese assets into easily sellable forms, and finally the selling
\nprocess to maximize the net sales value.<\/p>\n
Since managing bad assets would interfere with the daily
\nrunning of a bank, one could easily suspect that important
\ndecisions regarding bad assets would receive lower priority than
\nincoming new business. If not separated, the bank's management
\nand board of directors would have to use scarce time to discuss
\nmatters relating to bad assets instead of focusing on current
\nbusiness and strategy planning.<\/p>\n
IBRA is in a stronger position to pursue debtors, as this
\nagency is vested with extrajudicial power to foreclose on assets
\nand sell them, cutting through the red tape to maximize credit
\nrecovery.<\/p>\n
Although state bankers succeeded in securing from IBRA only
\nindividual NPLs of less than Rp 25 billion, it could be only part
\nof a bigger deception that might eventually subvert the recovery
\nof state banks' credits and consequently kill public trust in the
\nwhole bank restructuring program.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/state-banks-subterfuge-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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