BI must punish erring banks: DPR

BI must punish erring banks: DPR

JAKARTA (JP): The House of Representatives (DPR) suggested
yesterday that Bank Indonesia (BI), the central bank, be given
authority to take tougher measures against banks violating its
rulings on the Legal Lending Limit.

"So far only the Ministry of Finance has the authority to take
legal action against violators of the Legal Lending Limit (limits
of lendings to affiliated companies)," A.A. Baramuli, the
chairman of the House's Commission VII, told the press here
yesterday.

Commission VII deals with, among other things, the banking
industry and trade.

"I think the central bank should be able to take harsher
sanctions, such as suspension of the violators' licenses," said
Baramuli, an outspoken House member of the Golkar faction.

Governor of Bank Indonesia, Soedradjad Djiwandono, stated last
week that the central bank will take legal action against banks
found violating the legal lending limit regulation.

He said the number of banks violating the legal lending limits
had reached an alarming level.

"Such violations have been increasing recently. Last year's
number was higher than that in the previous year," he said,
adding that such violations very often resulted in problem loans.

Explanation

Baramuli said yesterday that Commission VII will ask the
central bank to give a detailed explanation of the violations.

"We'll ask Bank Indonesia to explain this problem during our
next hearing with its officials," he said.

Asked by reporters whether information on the Legal Lending
Limit violations is protected by the provision on banking
secrecy, Baramuli said he did not know. "Detailed guidelines for
the implementation of the banking secrecy provision have yet to
be issued." he said.

"We will try to find out the government's policy on banking
secrecy," he stated.

Meanwhile, bank analyst I Nyoman Moena criticized the rating
by Moody' Investor Service, an U.S. rating institution, which has
rated Indonesia' state-owned banks low.

"Their rating assessment is not comprehensive. They don't see
Indonesian banks contextually," he told the Antara" financial
information service yesterday.

According to Moena, Moody's data was not enough to evaluate
the performance of the state banks.

In its latest evaluation, the American institution rated all
the state banks at Baa3 for their "long term foreign currency
bonds" and Ba1 for their "long term foreign currency deposit
obligations", which are the lowest of its three categories.

He said that actually there are many measures which can be
used to evaluate a bank. Moody's evaluation was only based on the
micro aspect and not on the macro aspect of the banking industry.

"The macro aspect, that is the policy of the Indonesian
government on the banking industry, strongly influences their
performance," he said.

He cited BTN as an example. This bank specializes in providing
housing credits to help the government in its efforts to
construct houses for the general public.

He said, however, that despite this low rating, the public
still trust the state banks. "I don't see any negative impact
caused by Moody's low rating yet," he said. (13)