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)