Depositors reimbursed
Depositors reimbursed
Another potential source of social unrest was defused after
the government decided last week to use Rp 3.1 trillion (US$344.4
million) in taxpayers' money to reimburse all depositors of the
16 insolvent banks closed last November. Minister of Finance
Mar'ie Muhammad disclosed at a meeting with the House of
Representatives on Friday that the reimbursement of the remaining
deposits at the closed banks was decided upon by President
Soeharto.
The announcement should come as manna from heaven to the
thousands of depositors, given the severe economic crisis that
has wiped out thousands of businesses and laid off millions of
workers. Without the government's largesse, there would be little
chance of the depositors getting back their savings.
As Mar'ie asserted at the meeting with the House, the
government was not legally bound to reimburse the depositors for
they were not covered by the blanket guarantee pledged by the
government on banks' deposits and debts on Jan. 27 as part of a
new package of bank restructuring measures. The measure, as the
finance minister said, was taken entirely out of a sense of
justice for the depositors.
The manner in which the government has handled the impact of
the massive bank closures is indeed unusual, as is apparent in
the extraordinary nature of its latest bold move. After all, it
was the first time the government had closed so many banks at one
time and, as it happened, several of the closed banks had
politically connected shareholders.
The government had earlier spent Rp 1.7 trillion in taxpayers'
money to reimburse depositors of the closed banks with up to Rp
20 million per account. The reimbursement covered more than 70
percent of the depositors, but only about 30 percent of total
deposits.
Without the unusual measure announced last week, the remaining
deposits would have been repaid only after the banks' liquidation
had been completed which, judging from past experiences, could
have taken three to five years. But even after liquidation
completion, the depositors' chances of being refunded would have
been very slim because the banking liquidation regulation does
not put them on top of the list of creditors to be reimbursed.
Viewed from a point of justice, and considering the potential
for social backlash from a drawn-out process in settling the
remaining deposits -- especially because many of the remaining
depositors consist of small and medium-scale businesses --, the
decision on the reimbursement, though beyond legal obligation,
could be justified. This should, however, be taken only as a one-
off ruling because such largesse could cause moral hazards among
large depositors who are supposed to be well-informed of the
soundness of banks.
Reimbursing all the depositors does not, however, solve other
problems remaining in the aftermath of the closure of the banks.
First of all, there seems to be an utter lack of transparency in
the way in which the process of liquidation is being conducted.
The public and taxpayers may be left with a feeling of blatant
injustice if the government does not deal firmly with the
managements and shareholders of the closed banks.
The banking law and the bank liquidation regulation clearly
stipulate that directors and shareholders of closed banks shall
be held personally responsible for the liabilities of their banks
if assessments prove them responsible for the insolvency of their
banks. Yet it seems no legal action has been taken against the
directors and shareholders.
It also would be totally unfair to taxpayers if the government
does not act firmly, consistently and fairly in collecting the
credits of the closed banks irrespective of debtors' political
connections.