A banker's nightmare

Of late, national banks have come into the public spotlight, because of the inconsistent regulations and announcements of the government. For example, it was announced that national banks which belong to the C-category and could not possibly fulfill the four percent capital adequacy ratio (CAR) would be summarily liquidated on Feb. 27, 1999, and there were about 50 banks on the list.

However, one day before the scheduled date, an announcement was made to the effect that the date of liquidation of the ailing banks had been postponed for another two weeks. A relative of mine who made banking her lifelong career could not help bemoaning the inconsistency of the government. Perhaps the government was pressured by the ailing banks to the effect that liquidation of 50 banks would bring about more unemployment. This is undoubtedly true, because even when four state-owned banks were merged under the name Bank Mandiri, a local newspaper (Kompas, Feb. 23, 1999) reported that 15,000 employees were laid- off.

Recently many dilemmas have appeared or, in other words, problems which have no satisfactory solutions. Referring to the deferred liquidation cases, my above-mentioned relative said that such inconsistency on the government's side might easily cause zero confidence on the part of the public in national banks in general and in such an event a rush on national banks is not out of the question. And there is nothing more scary to bankers than a rush by clients on their banks.

In such a case even though the Central Bank in its capacity as bankers' bank might help the national banks with the required liquidity, the result may be that a bank collapses. Or the clients may transfer their accounts to foreign banks.

After all the public confidence in a bank is the banker's most precious asset.

A.DJUANA

Jakarta