Unfit and improper<\/p>\n
Should a person who has failed a fit and proper test for the
\njob of leading a major government bank be allowed to retake it?
\nPresident Abdurrahman Wahid seems to think so. The President has
\nopenly asked Bank Indonesia to conduct another test on a longtime
\nacquaintance, Prijadi Praptosuhardjo, for the position of
\npresident of government-owned Bank Rakyat Indonesia (BRI).<\/p>\n
While the central bank kept the result of the first test
\nconfidential in keeping with regulations, the President's open
\nappeal made the information -- that Prijadi has failed the test
\n-- public knowledge. More than a question of breach of
\nconfidentiality, however, the President's action amounts to
\ndirect interference in the activities of Bank Indonesia, whose
\nindependence is guaranteed by the 1999 law on the central bank.
\nThe President thus made it two instances of interference in a
\nrow, having first flagrantly attempted to unseat Bank Indonesia
\nGovernor Sjahril Sabirin.<\/p>\n
The test was a mechanism instituted in 1999 to prevent a
\nrepetition of the rampant mismanagement that sent many banks to
\nnear collapse following the financial crisis in 1997. The legacy
\nof that free-for-all banking era is still very much felt today.
\nVirtually every bank in this country, whether government or
\nprivately owned, has fallen into the hands of the Indonesian Bank
\nRestructuring Agency (IBRA). Almost all of them too, including
\nBRI, have required massive financial injections from the
\ngovernment to prevent them from folding. The massive cost of
\nbailing them out has been borne by taxpayers.<\/p>\n
As part of the process of reconstructing the beleaguered
\nbanking system, Bank Indonesia introduced fit and proper tests to
\nweed out bad bankers from the system. This mechanism is essential
\nbecause in the past loans were handed out on the basis of just
\nabout everything except creditworthiness. Credits were doled out
\non the basis of family ties and kinship or generous kickbacks,
\nand lending to companies within the same business group was the
\nnorm. Needless to say, most of these loans were not backed up by
\ncollaterals.<\/p>\n
When the financial crisis struck the economy in 1997, many of
\nthese loans were defaulted, sending virtually every bank in the
\ncountry to the brink of collapse in the process. While dozens of
\nbanks have since been closed, the government has been forced to
\nbail out most of them, or face a total collapse of the banking
\nsystem. This has been a very expensive lesson in banking
\nmanagement. It is therefore essential that Bank Indonesia now
\nthoroughly assesses the track records and characters of
\ncandidates for directors of all banks, including BRI.<\/p>\n
A person who has flunked Bank Indonesia's fit and proper test
\nis unlikely to pass it the second time around. This is not a
\nschool exam, a university entrance exam or a driving test, which
\none can take again and again until one passes. People flunk the
\nBank Indonesia test because of their characters or their track
\nrecords. A second test is unlikely to change that.<\/p>\n
President Abdurrahman's claim that he has known Prijadi long
\nenough to attest to his character is just one of the many inputs
\nthat Bank Indonesia examiners take into account when conducting
\ntheir test on that candidate. While the government has every
\nright to appoint anyone it wishes to lead BRI, it must never push
\nfor Prijadi's nomination against Bank Indonesia's recommendation.<\/p>\n
This is not only for the sake of BRI itself but more for the
\nsake of the President's own future. The rate at which he has been
\nflaunting rules -- the BRI and BI governorship cases certainly
\nfall into that category -- the President is giving plenty of
\nammunition to opponents and critics. Many of them are already
\ntalking about turning the meeting of the People's Consultative
\nAssembly in August into an opportunity to impeach him.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/unfit-and-improper-1447893297",
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"sponsor": "Okusi Associates",
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