Choosing a bank in a crisis

Choosing a bank in a crisis

By Taufik

Ten years after the New Order government launched Pakto 1988
(October Package 1988), the country's banking sector is in its
gloomiest era. Not only have the country's state and private
banks suffered huge monetary losses, but they have also lost
credibility with their clients. For example, Bank Central Asia
(BCA) was affected by a major bank run, which led to the bank
being made a nationalized bank (BTO). Also taken over was private
bank Danamon Bank, while other big private banks such as BDNI and
Bank Umum Nasional were closed by the government.

Like the private banks, state banks also suffered huge losses
as a result of a prolonged economic crisis, which started in the
middle of 1997. But due to their ownership status, the state
banks did not have to suffer any "adjustment" to maintain their
existence. The crisis of confidence faced by private banks
appeared to be a blessing in disguise for state banks, with a
large number of depositors shifting their money from private
banks to state banks.

International banks also enjoyed benefits from the crisis of
confidence affecting private banks. They have become the new
targets of Indonesian depositors. What is interesting is that the
international banks have taken advantage of the phenomenon by
launching aggressive promotion campaigns.

This condition was a contradiction to the phenomenon which
happened not long after the government launched Pakto 1988. At
that time, both state and international banks were left
powerless, as if they were only spectators watching the country's
private banks move aggressively to expand their business. As a
result, the private banks managed to become dominant players in
the Indonesian banking market in less than 10 years.

The phenomenon affecting banking over the past two years
clearly raised a big question about the fate of the country's
private banking sector. Especially, have customers really
forsaken domestic banks? A survey held recently on 926 bank
customers, from various socioeconomic strata in 10 big cities on
three of Indonesia's main islands, shows that state banks
dominate the top five positions for brand awareness. Three of the
five favorite banks were state banks while the remaining two were
domestic private banks. Interestingly, one of the domestic
private banks, BCA, has become a state bank. The big five were
BCA, BNI 46, BRI, BTN and Bank Bali.

The survey's result, actually, was not contradictory to the
phenomenon affecting banking lately. Undoubtedly, state banks are
much more popular (more truthful) than private banks in this time
of crisis, even though the government has guaranteed the safety
of customers' funds deposited both in state and private banks.
However, the fact that BCA topped the rank, with a large
proportion, reflects that customers in Indonesia make their
choice of bank very carefully. They do not only take into account
the status of the shareholders but also the advantages offered by
the banks. Nowadays, the reasons for deciding into which bank to
deposit funds are not only safety and good returns but also, more
importantly, to get support in handling various routine
transactions.

For example, this is the reason why people prefer BCA to BNI
46. BCA can give more services related to the routine household
demands of Indonesian depositors than BNI 46. In addition, BCA,
with its new BTO status, is no longer different from BNI 46. They
both belong to the state.

It is clear, however, that being a state bank has become a
great selling point. That is why Bank Bali, which provides
similar services to its customers, took fifth position in the
rank. Because its service network, mainly its branch offices or
treasury offices, is much smaller than that of BNI 46, BRI and
BTN. And especially, the last bank, BTN, has taken advantage of
the network of PT Pos Indonesia. In other words, besides
ownership status, the vast network owned by the concerned banks
plays an important role.