Banking woes caused by poor integrity

JAKARTA (JP): The lack of integrity of banking executives and shareholders is the major cause of the country's banking crisis, says a former banking chief.

Rachmat Saleh, a former governor of Bank Indonesia (the central bank), said yesterday that bank executives often abuse banking norms for their own interests while their shareholders often pressure their executives for such a purpose.

"It is a matter of poor integrity within the banking management," Rachmat, also a former trade minister, said at the closing of the Institute of Indonesian Bankers' special training for senior banking executives.

The special training program was attended by 22 executives of both state and private banks.

Rachmat, who is also deputy chairman of the institute's national council, said that it is high time for both bank executives and shareholders to improve their professional integrity. Otherwise, the public will have no more confidence in the banking system.

He did not mention specific banks in his statement but it was obviously in reference to the country's state-owned banks, which recorded a great amount of bad debts over the past two years.

The problem of the banking industry, he said, is also partly caused by "over confidence" on the part of bank executives concerning the country's economy and their clients.

"Bankers should have the capacity to forecast the economic outlook as the business climate is not always rosy," he said.

Rachmat, however, said that the decline in business performance has not been suffered only by Indonesian banks as the same phenomena of incurring losses, falls in profits and massive write-off measures have also occurred in many overseas banks.(hen)