Banks told to improve prudential management
Banks told to improve prudential management
JAKARTA (JP): A top consultant says Indonesian banks must
improve prudential management and include government-appointed,
professional independent auditors within their boards of
commissioners.
The chief executive of Reform Consulting, Laksamana Sukardi,
told a seminar on "Bad Loans, Problem Loans" here Saturday that
these steps could prevent activities which could lead to bad
loans and cause severe financial losses on the part of creditors.
"Independent auditors, who will have the authority to
implement a management process audit, should be professionals who
are not easily tempted or pressured by shareholders or
superiors," Laksamana said.
His proposals come amid public concern that bad loans have
been increasing in the country since the introduction of a tight
money policy in 1990 following the announcement of deregulatory
measures in the banking industry in 1988.
Laksamana said auditors will act independently if they are
appointed by Bank Indonesia, the central bank, to which they will
be responsible.
Laksamana suggested that the presence of such independent
auditors should be an absolute obligation for banks in the
future.
He said before providing loans to customers, banks should test
their credit initiation, analyze the feasibility of their
businesses, document the credit well and monitor the use and
management of the loan funds.
"The absence of any of these factors may cause the credit to
go sour," he warned.
Bapindo
"In the Bapindo case, none of these steps were taken. In fact,
each one involved has violated the standard procedures," he said.
The state-owned Bank Pembangunan Indonesia (Bapindo) provided
loans of US$430 million to the Golden Key Group without any
contract of transaction. The loans have now gone sour and a
number of Bapindo executives and the owner of the business group
have been detained. Several high-ranking officials have been
questioned by the Attorney General's Office for their alleged
support of the provision of the loans.
Laksamana, who was a former vice president of Citibank and
former top executive of Lippobank, said that bad loans and
problem loans encountered by the banking system are caused mainly
by a lack of control from Bank Indonesia and an uncontrolled
desire of the major shareholders of the banks to exploit the
funds for their own interest.
Meanwhile, President of Bank Dharmala T.A. Sutanto suggested
that banking executives take an oath at the time of their
appointment and that a special court be established to deal with
banking problems. (10)