BI urged to ease liquidity to block bank run

BI urged to ease liquidity to block bank run

JAKARTA (JP): Bank Indonesia, the central bank, should inject
fresh blood into the banking industry by easing rupiah liquidity
if it does not want to see a bank run or even default, bank
dealers said yesterday.

They said several banks now faced liquidity problems and were
forced to postpone or cancel credits already in the pipeline and
adjust the rates for the already disbursed credits.

"We already face liquidity problems, we don't know what will
happen if the central bank continues to maintain this tight
monetary policy for another week," a bank dealer said.

Bank Universal president Stephen Z. Satyahadi confirmed that
his bank had also postponed disbursing credits due to the current
unstable and high rate condition.

Businesspeople and analysts have also called on the government
to supply rupiah bit by bit to the market to reduce the current
cutthroat competition among banks in attracting depositors and
prevent a bank run.

Businessman Sofyan Wanandi, for instance, said businesses had
lost direction as they did not know when the tight monetary
policy would end.

Bank Indonesia governor J. Soedradjad Djiwandono yesterday
called on businesses to support the government's measures and
adjust themselves to the current situation.

"Everyone in the real sector must know what will be the effect
of the current situation and must adjust themselves," the
governor told journalists.

"It (the tight monetary policy) affects the government, the
import and export sector as well as the private sector," he
added.

Bank Indonesia's managing director Paul Soetopo Tjokronegoro
assured the market earlier this week that the central bank would
supply enough money to meet banking and business needs.

But until yesterday, the central bank still had not bought
short-term securities (SBPU) from commercial banks and continued
to drain excess liquidity through its short-term promissory notes
SBIs.

Banking analyst Laksamana Sukardi said that if the central
bank kept the current tight liquidity for another week, there
could be a bank run.

Several banks were rushed by depositors earlier this week due
to widespread rumors on their liquidity problems.

Several commercial banks have on-counter announcements
advising depositors to inform them beforehand if they want to
withdraw a certain amount of money due to tight rupiah liquidity.

A customer service officer at publicly listed Bank Tamara at
its headquarters on Jl. Sudirman said yesterday that a customer
can still freely withdraw up to Rp 50 million (US$17.54 million).

But if a customer wanted to withdraw more than that, they must
fill in several forms and could only take the money later in the
day or the following day, she said.

"This procedure must be implemented now, but it will only be
temporary," she said.

However, she said if the total amount was under Rp 10 million,
her bank would immediately approve the withdrawal.

State-owned Bank Negara Indonesia's and Bank Bali's Melawai
offices in South Jakarta also have an announcement advising
depositors wanting to withdraw more than Rp 20 million to inform
the bank 24 hours before the withdrawal.

A Bank Bali officer said that kind of advise was common
practice among banks during this tight rupiah situation. Even in
a normal situation, banks advised depositors wanting to withdraw
a large amount of funds to inform them beforehand.

"Branch offices do not keep a lot of funds, so it is normal to
advise customers about that. Banks do not want to keep a large
amount of funds idle at branch offices," he said.

Bank Artha Graha has also called on customers wanting to
withdraw more than Rp 10 million to inform the bank several hours
beforehand.

"We made this announcement long before the rupiah crisis. We
do this because we want to serve our customers better," an Artha
Graha customer service officer said. (08/aly/das/rid)