Banking woes blamed on intervention

Banking woes blamed on intervention

BANDUNG, West Java (JP): The interference of unauthorized
parties in the management of commercial banks has caused
inefficiency in the country's banking industry, Minister of
Finance Mar'ie Muhammad says.

"I should say that such a dysfunctional process in the banking
industry should be terminated in order to keep our banking system
on the correct track and to improve its efficiency," he told
three reporters after presenting a keynote speech at a seminar on
Saturday on economic and political development in Asia and the
Pacific.

He refused to specify any example of the intervention of
unauthorized parties in the banking industry and said that "I am
talking about the banking system, not about whom is involved in
the interference."

The minister briefed the three reporters in a room of a local
tax office to avoid dozens of other journalists who had
approached him and bombarded him with questions on various issues
ranging from the newly introduced deregulation to the financing
of the recent purchase of German battle ships.

"You will be likely surprised to know that foreign
professionals have honestly recognized that our banking industry
is running quite well," he said.

"They have even praised the government on its correct and
timely handling of banking scandals, including that at Bank
Pembangunan Indonesian (Bapindo)," he pointed out.

The problem is now how to let the banking industry and other
business sectors operate in the right way, he said.

He said he would say to unauthorized parties that "Please, let
the banking industry go on its own way because banks have their
own jobs to do."

He believed that the termination of dysfunctional practices
will help minimize problems in the banking industry.

Indonesia's banking industry has recently been hit by a
scandal at Bapindo, which has caused actual losses of Rp 1.3
trillion.

Pressure

Bapindo executives, who were allegedly involved in issuing
illegal loans to the Golden Key Group, said in the testimony at
the court trial of the group's president, Eddy Tansil, that they
had received pressure from senior government officials to issued
the loans.

The senior officials were the then coordinating minister for
security and political affairs, Sudomo, the then minister of
finance, Sumarlin, and the then junior minister of finance,
Nasrudin Sumintapura.

Mar'ie expressed concern Saturday that bank managers sometimes
forget the responsibility given them by the public to run the
banks in a proper, sound way. Instead, management treats banks as
if they are their own businesses.

"Ignorance of such moral awareness has caused some tragedies
in banks. I would say that a good mentality has not yet existed
in some banks," he said.

He was also of the opinion that banking tragedies in the
country have been partly caused by the absence of knowledge among
executives and officials on the bank ruling.

"In some cases, we have found out that some managers ignored
the principles of prudential management, including supervision,"
he added.

He said that bank executives should consider criticism by
foreign institutions as a warning that encourages them to improve
professionalism.

Standard & Poor's (S&P), a New York rating agency said in its
recently published ASEAN Profile report that the Indonesian
banking industry was undergoing a period of financial stress as a
result of the banking reforms introduced by the government a few
years ago.

A survey of the London-based International Banking Credit
Analysis (IBCA) also said that the rates of return on assets and
equities at the Indonesian state-owned banks are the lowest in
Asian countries.

Mar'ie told The Jakarta Post Saturday that S&P's assessment
was not valid because it was not an official rating.

"Unfortunately, the opinion came in coincidence with the
tragedy in our banking industry," he pointed out. (fhp)