Bundesbank to assist RI in bank reforms
Bundesbank to assist RI in bank reforms
JAKARTA (JP): Deutsche Bundesbank, Germany's central bank, is
offering its expertise to help Indonesia with the difficult task
of consolidating the country's ailing banking industry, said a
senior official of the bank.
Stefan Schoenberg, a director at Deutsche Bundesbank, said
here yesterday that Germany was looking for possibilities to
assist Bank Indonesia in the areas of bank supervision and
monetary policy.
"We've also talked with the finance minister, Bank Indonesia
governor, and IBRA (Indonesian Banking Reform Agency) to get an
opinion on what are the needs of the Indonesian authorities," he
said following a meeting with Indonesia's Coordinating Minister
for Economy, Finance and Industry Ginandjar Kartasasmita.
He said his team would soon make proposals on how to meet
those needs.
He said Ginandjar had mentioned two areas in particular in
which the Bundesbank could help: central bank legislation and
banking supervision.
He explained that Indonesia was facing a very difficult
situation in its banking sector due to the sharp drop in the
value of the rupiah against the U.S. dollar and the alarming
level of bad debts.
It is in the interest of the Indonesian government "that such
events do not repeat themselves and that you have a sound banking
system," he said.
Analysts have said Indonesia's banking sector is on the brink
of collapse. The rupiah has fallen sharply since August and
confidence in the banking sector is at its lowest point.
The currency fell to its lowest level of Rp 17,000 to the U.S.
dollar in January, compared to Rp 2,450 in July.
The country's banking sector is currently being examined by
the IMF, which together with Indonesia's economic ministers team
has been in a marathon meeting for two weeks reviewing the
country's economic reform programs.
A review on monetary policy and banking reform is expected to
be completed today, said IMF Asia-Pacific director Hubert Neiss
yesterday following a meeting with officials of Bank Indonesia.
Indonesia has some 212 private banks, which are being
encouraged to merge into less than 30.
The government has set a minimum bank capital requirement of
Rp 1 trillion to be met by the end of this year; Rp 2 trillion by
the end of 2000; and Rp 3 trillion by the end of 2003.
With most banks having an average Rp 500 billion in capital,
they will be forced to either merge or invite foreign investors
to fulfill the new requirement.
The government set up IBRA in January to help rehabilitate
domestic ailing banks. Rumor has it that some 54 private banks
have been in the agency's intensive care unit.
In an effort to revive confidence in the banking sector, the
government has said that it would guarantee foreign currency and
rupiah-denominated claims by depositors and creditors of all
locally incorporated banks. (08)