Don't knock BI for loan scams, pleads new deputy governor

Don't knock BI for loan scams, pleads new deputy governor

The Jakarta Post, Jakarta

People seeking to blame the central bank for the recent scandals
involving bad loans at state-owned banks are misdirecting their
criticism, according to a newly elected deputy governor of Bank
Indonesia.

"It's strange that third parties, such as Bank Indonesia, are
being blamed," said Siti Chalimah Fadjrijah during a forum held
by the Association of State-owned Banks (Himbara) on Thursday.

"The main responsibility lies on each bank's management, which
initially approved the loans."

She was referring to the high-profile probes into alleged
irregularities at some state-owned banks, with many of the loans
subsequently turning sour. The Bank Mandiri case has attracted
particular public attention.

The Mandiri scandal, which revolves around Rp 1 trillion worth
of bad loans, has given rise to suggestions that the central
bank, which is responsible for supervising the nation's banking
sector, has not been doing its job properly.

Siti said that the main problem stemmed from the approval of
loans by bank personnel who were usually involved in a conflict
of interest vis-a-vis the borrowers.

"The damage is already done when personal interests become
involved," she said.

Echoing her comments was Sigit Pramono, Himbara chairman, who
said that outside intervention in state-owned banks was
dangerous.

"State banks need to have the courage to say no to any form of
intervention, from any party, as in the end it will only
endanger the bank itself," said Pramono, who is also the
president director of Bank Negara Indonesia (BNI), the nation's
third largest bank by assets.

Pramono said that he fully understood why state-owned banks
were currently afraid to extend loans due to the recent spate of
scandals. However, he hoped that this would only be a temporary
phenomenon as economic growth would be heavily dependent on a
fully-functioning banking system.

He added that the current "reckless" assumption that all bad
debts involved criminality had to be discouraged as it would only
result in potential borrowers being deterred from seeking loans
and adversely affect the reputation of the Indonesian banking
system.

"If the recent investigations were meant to serve as shock
therapy for corrupt bankers, I think they succeeded,"
said Pramono. "However, don't keep shocking the rest of the
system."