Bank Indonesia to install bank inspectors next week
Bank Indonesia to install bank inspectors next week
JAKARTA (JP): Bank Indonesia will permanently install its
supervisory officials in domestic banks starting early next week
in a bid to improve the effectiveness of its banking supervisory
function, a senior official of the central bank said on
Wednesday.
Idris Kadir of Bank Indonesia's banking supervisory division
said the central bank officials were being assigned to identify
and assess the potential risk of the banks, including foreign
exchange and lending risks.
He said the on-site supervision would begin at the giant state
Bank Mandiri and later at state Bank Rakyat Indonesia, Bank
Tabungan Negara and Bank Negara Indonesia, and five recapitalized
banks, including Bank Lippo, Bank Central Asia, Bank Niaga, Bank
Internasional Indonesia and Bank Danamon.
He said two supervisory officials would be installed in each
bank, with four in Bank Mandiri because of its size.
"At the first stage, the on-site supervision will only cover
the nine banks, given their dominant role in the industry," he
added.
Idris said the central bank had yet to decide on whether the
new measure would also cover foreign banks operating in the
country.
He said the supervision was part of an agreement with the
International Monetary Fund (IMF), which is providing the country
with a multibillion dollar bailout package.
Idris said the on-site supervision was deemed more effective
than off-site which focused only on the analysis of financial
reports.
He said an off-site supervision system was not able to detect
and anticipate the potential risk of banks and to formulate
immediate corrective and proactive action.
He explained that under the on-site supervision system, Bank
Indonesia officials installed in the banks must report their
findings routinely to the central bank and the IMF.
He said the findings would be discussed first with the top
management of the monitored banks before they were reported to
the central bank.
Idris said that if the findings were significant enough, Bank
Indonesia would immediately order the particular bank's
management to take corrective measures.
Indonesia's banking sector had been poorly managed in the past
and was seen as one of the primary factors sending the country
into its current economic and financial crisis.
The government has been spending the equivalent of billions of
dollars to help finance the costly bank recapitalization program.
Bank Indonesia must ensure that banks were operating prudently
in order to avoid a similar crisis from reoccurring in the
future, Idris said.
Bank Indonesia sent inspectors to foreign banks last week to
ensure that they met banking regulations, notably the rules on
minimum net open positions in foreign exchange deals.
The move was mostly seen by analysts as an effort by the
central bank to curb speculation on the rupiah.
The rupiah plunged to a 21-month low of 9,570 per dollar two
weeks ago amid domestic political uncertainty ahead of the
crucial General Session of the People's Consultative Assembly
(MPR) in which President Abdurrahman Wahid will deliver an
accountability report on his first year in power.
Political tension has increased in the run-up to the August
session of the MPR, the country's highest legislative body which
can unseat the President. (rei)