Bank liquidation not easy, says Soedradjad

Bank liquidation not easy, says Soedradjad

JAKARTA (JP): Liquidating ailing banks is not easy because it
involves many parties, Bank Indonesia Governor J. Soedradjad
Djiwandono said yesterday.

Speaking before the monthly cabinet meeting on economic
affairs the governor reiterated that banks should be liquidated
if efforts to bail them out failed.

"If a bank is already in serious trouble, why not simply put
it into liquidation," Soedradjad said.

"However, the decision to liquidate a bank cannot be taken
hastily," he said.

The Minister of Finance, Mar'ie Muhammad, said Tuesday the
government would not hesitate to liquidate banks in a bid to
strengthen the banking industry.

He said the government had the right to liquidate banks as
stipulated in the government regulation on bank liquidation.

Problem banks, if allowed to continue operating, could hinder
the growth of the banking industry, Mar'ie said.

The minister agreed liquidation should be the last resort.

Before liquidating a bank everything must be taken into
account, including small depositors' interest, Soedradjad said.

The governor cited the problems involved in liquidating Bank
Summa to show the complexity of the liquidating a bank. The bank
is still being liquidated.

Bank Summa, which was owned by the Soeryadjaya family, was
closed in 1992 because of US$500 million in bad loans.

Soedradjad refused to say how many banks were in danger of
being liquidated and rejected rumors the central bank would
liquidate 24 banks.

"That's not correct. I don't know where they got that figure,"
he said.

Indonesia is believed to have about 11 banks in serious
financial trouble.

Soedradjad said last December's liquidation ruling was not
formulated because of the emergence of financially troubled
banks.

It was introduced because there was no ruling governing bank
liquidation. Before the new regulation, bank liquidation was
based on commercial law from the colonial era which did not
recognize depositors or differentiate between small and big
depositors. (rid)