Bank ratings needed to protect depositors
Bank ratings needed to protect depositors
JAKARTA (JP): An economist called yesterday for the
introduction of bank rating agencies to help consumers assess the
health of the country's banks.
The president of the Indonesian Business Data Center,
Christianto Wibisono, said bank ratings would enable the public
to make more informed choices, and would push banks to improve
themselves.
"The public would know which local banks are healthy and which
ones are not, and this would prevent depositors from moving their
funds from local banks to foreign banks," Christianto said.
He said bank ratings would show consumers that investing in
some banks would be risky, so that depositors would leave banks
with lower ratings and pick more sound ones.
It would encourage some banks to strengthen themselves, and
might push smaller banks to consolidate and merge, he said.
He said the number of banks in the country should be at least
half the existing 221 banks, which include state-owned, private
and foreign banks.
Christianto said Indonesia currently only had a rating agency,
PT Pefindo, which focuses most of its activities on commercial
paper and bond issuers.
He said bank rating agencies must be independent of business
group owners, to prevent possible conflicts of interest.
Affiliation with an established foreign institution would also
help build such an agency's credibility, he said.
Christianto also called for the establishment of a banking
depositors insurance, to guarantee that depositors would get back
their entire account balance should their banks close.
Depositors must be insured by a consortium involving the
government and private firms, he said.
Insurance
Many countries provide insurance for bank depositors to
protect consumers from losing their money deposited in banks that
file for bankruptcy.
U.S. banks and other financial institutions are required to
insure their depositors under the Federal Deposit Insurance
Corporation, which guarantees to reimburse deposits in case of
the institution's collapse.
Christianto said the U.S. government established the insurance
at a time when many of its financial institutions were tumbling.
Separately, the Econit Advisory Group urged the government
yesterday to increase the capital requirement for private banks
to fortify the banking sector.
Econit director Laksamana Sukardi said the existing capital
requirement for banks to operate was still much lower than those
of other countries.
"The government must raise the minimum capital requirement to
between Rp 700 billion and Rp 1 trillion," Laksamana said.
According to the existing capital requirement, a bank would
have to increase its paid-up capital to at least Rp 150 billion
if it wanted to upgrade its status to a foreign exchange bank.
Banks which already operate as foreign exchange banks,
according to the existing capital requirement, are allowed to
gradually increase their paid-up capital to Rp 50 billion by
September of this year, to Rp 100 billion by September, 1999 and
to Rp 150 billion by September, 2001.
Previously, the capital requirement was Rp 10 billion for non-
foreign exchange banks and Rp 15 billion for foreign exchange
banks.
Laksamana said increasing the capital requirement would help
domestic banks compete with foreign banks, many of which would
enter the country in the upcoming years, and would force smaller
banks to merge.
However, the government must equally impose the requirement on
foreign banks operating in the country, he said.
According to bank financial records as of March 31, many
foreign exchange banks still could not meet the minimum capital
requirement of Rp 50 billion, including several branches of
foreign banks. (das)