11 finance companies' licenses suspended

11 finance companies' licenses suspended

JAKARTA (JP): The government has suspended operational
licenses of at least 11 companies, according to Director General
for Financial Institutions Bambang Subianto.

Bambang told a hearing of Commission VII of the House of
Representatives yesterday that the 11 companies were part of the
254 financing companies now registered with the Ministry of
Finance.

He, however, did not explain the reasons for the suspensions
and when the measures were taken.

In addition, Bambang said that around 30 of the financing
firms have not been fully operational.

He said that the outstanding offshore loans of financing
companies -- those involved in leasing, factoring and consumer
financing -- increased by nearly 30 percent to Rp 9.2 trillion as
of April this year, from Rp 7.2 trillion as of April 1994.

Bambang said that the financing companies' offshore loans were
still too high and that they would be further curtailed this year
in a bid to reduce the money supply at home.

"The uncontrollable increase in the offshore loans would cause
an excessive supply into the economic liquidity which will, in
turn, result in stronger inflationary pressure," he told the
commission, which is in charge of banking, financing, trade and
cooperatives.

Bambang said that the government's decision last December to
curb financing companies' offshore loans would be maintained in
the current fiscal year.

The Minister of Finance issued surprising measure late last
year to improve its control against the financing companies
which, according to some reports, were often used by banks to
break their legal lending limits.

The measures include the limitation of their offshore loans to
a maximum of five times their equity, in addition to the
appointment of the central bank to help supervise the financing
firms.

Bambang said that in addition to offshore loans, the central
bank's supervision would include the monitoring of the financing
firms' lending activities so that their credits would not exceed
the indicative target of the overall credits in the current
fiscal year.

The government is limiting credit growth to 19 percent this
fiscal year in a bid to cool economic overheating. (hen)