Bankers expose weaknesses in government deposit insurance plan
Bankers expose weaknesses in government deposit insurance plan
The Jakarta Post, Jakarta
While generally acceptable in principle, the government-
proposed bank deposit insurance law still contains weaknesses
that could deal a serious blow both to the public and banking
sector, top bankers have warned.
Representatives from the country's major banking associations
conveyed on Wednesday the concerns to the House of
Representatives Commission IX on financial affairs -- which is in
charge of deliberating the bill.
Agus Martokusumo, chairman of the National Private Banks
Association (Perbanas), questioned, among other things, a clause
the would protect officials of the planned deposit insurance
agency (LPS) from being sued, in as far as they acted in
accordance with their mandated duty.
"If that's the case, the same treatment should also be
extended to the shareholders of the troubled banks, as far as
they are deemed as having fulfilled their obligations," Agus told
the lawmakers.
The move is necessary to ensure equal treatment for both the
people who govern and those who are being governed, Agus added.
He is also the president of Bank Permata.
Perbanas also voiced concern over the fact that many of the
LPS operational guidelines, stated in several clauses, were based
on assumptions that the planned establishment of the financial
services authority (locally abbreviated as OJK) was already in
existence.
In the draft, the word OJK has been mentioned 18 times. "This
is confusing, how can we base anything on something that doesn't
even exist?" he asked.
OJK is a powerful agency the government is planning to set up
before 2010, tasked with supervising the country's wide range of
financial institutions.
The bill on the deposit insurance scheme was submitted to the
House in November last year, to be used as the legal basis for
the setting up of a deposit insurance agency to replace the
existing costly government blanket guarantee program. Under the
current program, the government would cover all obligations of
banks that close, including savings, deposits and liabilities to
other parties.
But the government has said that six months after the bill
becomes law, the funds to be covered by the government's existing
program would gradually be reduced.
The LPS will be in operation up until after the guarantee only
covers individual deposits of not more than Rp 100 million.
Elsewhere, other associations, including Association of State
Owned Banks (Himbara) and the Association of Regional Banks
(Asaba), reiterated the importance of applying a risk-based
premium fee and a more specific timetable for claims payment.
According to the draft, the premium fee would only be applied
after the first two years of operation of the LPS. This means
that the healthier a bank the lower the premium rate it has to
cover.
But, Asaba chairman Hasan Soeftendy anticipated a more
transparent and prudent calculation in determining the premium
rate as it could affect a bank's business operation, especially
smaller banks.
Under the current blanket guarantee program, the fee is set at
a flat rate of 0.25 percent of a bank's third party liabilities,
which generates some Rp 2 trillion annually.