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)