Bad debts still at safe level: BI chief
Bad debts still at safe level: BI chief
JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono dismissed yesterday any suggestion that bad debts were adversely affecting the banking industry, saying that the ratio remained within tolerable limits.
Speaking in a seminar on possible solutions to Indonesia's problem loans, the central bank governor said that the level of bad debts was yet to affect the banking industry or the country's economy as a whole.
"In order to guarantee that the level of problem loans is really at a safe level, Bank Indonesia has intensified its supervision of banks encountering difficulties," Soedradjad told a seminar at the Financial Club.
Speakers at the seminar, which was convened by the STIE IBII business school, included the outspoken economist Kwik Kian Gie; Robert Clark, a former U.S. currency controller; and William Haworth, the managing director of Barents Group LLC.
Soedradjad told the seminar that the central bank had adopted a number of resolutions in order to deal with the problem loans, which have become a subject of public debate over the past two years.
The three resolutions dealt with the management of the existing bad loans, the introduction of intensive supervision of banks incurring a large number of bad debts and taking preventive measures against new problem loans, he said.
The central bank recently issued four new regulations as part of its efforts to prevent a further increase in bad debts. The regulations include a requirement that banks submit an annual working program and that they publish financial reports.
In a recent parliamentary hearing, the central bank governor said that the level of bad debts in the country's commercial banks rose to 3.97 percent of their outstanding credits, of about Rp 188.94 trillion (US$85.88 billion), as of January, up from 3.88 percent as of September 1994.
The level of bad debts in state banks alone, which control around 50 percent of the lending market, reached a higher level -- 5.8 percent or about Rp 6.1 trillion -- as of January.
Increase
The increase in the level of bad debts has taken place amid the central banks's intensive efforts to deal with the problem. Soedradjad said the rise reflected an increase in the number of the doubtful loans turning sour.
Meanwhile, Kwik, who chairs the research and development agency of the Indonesian Democratic Party (PDI), told the seminar that the level of the country's bad debts was no longer safe.
"The state banks have technically gone bankrupt with their high level of bad debts. That indicates that the level of bad debts is no longer safe," he said.
Soedradjad acknowledged that the adoption of the three resolutions would not immediately resolve the difficulties because, he said, dealing with problem loans, especially the existing bad debts, was not only complicated but would also take time.
The central bank has intensively assessed the nature and level of Indonesia's problem loans to ascertain their impact on the banking system and the economy as a whole, he said.
"The assessment proves that the country's bad debts are still within the safe limit," said Soedradjad. (hen)