Banks urged to restructure, strengthen capital base
Banks urged to restructure, strengthen capital base
JAKARTA (JP): Bank Indonesia director Hendrobudiyanto
yesterday called on local banks to restructure, improve human
resources and strengthen their capital base to face free trade in
financial services.
Speaking at the close of an Indonesian National Private Banks
Association meeting last night, Hendro said it was time to take
such measures, considering that free trade in services would
start soon in the region and the world.
"In the free market era, only healthy and disciplined banks
will survive competition," Hendro said after inducting A.S.
Subowo from Bank Central Asia as new chairman of the banks
association, replacing Trenggono Purwosuprojo.
Free trade in services is expected to sweep the Southeast
Asian region by 2003 under the ASEAN Framework Agreement on
Services.
It will eventually cover the Asia-Pacific region through the
Asia-Pacific Economic Cooperation forum and then the world
through the General Agreement on Trade in Services.
Even now, Hendro said, financial services were already
globalized, with huge cross-border funds movement.
Hendro said the country's banking industry should therefore
prepare themselves for free trade by strengthening their
competitiveness.
Hendro said the country's banking industry was still infected
by several weaknesses, including a weak capital base, incompetent
human resources, bad loans and problem banks.
Speaking at the opening of the meeting Thursday, President
Soeharto also called on local banks to cut down problem loans,
strengthen capital and minimize banking crimes.
Hendro reiterated that local banks should uphold effective and
objective evaluation, procedures and administration in their
business to create sound, self-regulatory banking in the country.
Yesterday's meeting endorsed a banking code of ethics to
ensure fair banking competition in the country.
The meeting's chair Mochtar Mandala said the banking code of
ethics provided local banks with boundaries on acceptable banking
practices.
"With this code of ethics, banks are expected to compete
healthily," Mochtar said.
Meanwhile, Mark E. Hansen from PT Booz. Allen & Hamilton
Indonesia said at yesterday's session that Indonesian banks
should be bold enough to abandon their current banking practices
to find a new strategic focus.
"Most Indonesian banks do not want to be more focused but want
to be universal banks," Hansen said.
"Without focused strategic changes, many banks would fail in
their needed transformation," he added.
He said that Indonesian banks should commit to changes,
redefine their proposition value, and -- the most possible one --
form an alliance with global players to open access to world-
class capabilities. (rid)