Govt bank probe on credits 'may send wrong signal'
Govt bank probe on credits 'may send wrong signal'
JAKARTA (JP): The government's hastiness in trying to recover
massive liquidity support given to ailing banks may send out a
wrong signal about efforts to rehabilitate the troubled industry,
an expert has warned.
Pande Raja Silalahi, an economist at the Center for Strategic
and International Studies, said on Saturday that last week's
marathon interrogation of several bankers could lead people to
think that the main target of the bank restructuring program was
to recover the liquidity support.
"The government is moving hastily and creating an impression
that its main target is to get its money back," he said. "They're
exaggerating it. Is this for political reasons? The authorities
must come up with a more systematic program to restructure the
banking sector," he added.
The Attorney General last week started questioning several
bank officials and owners, including Mohammad (Bob) Hasan, the
long-time golfing partner of former president Soeharto, in
connection with efforts to recovering the massive Bank Indonesia
liquidity support given to their banks.
Some of them have promised to return the liquidity support
before the Sept. 21 deadline set by the government last month
after discovering that their personal assets would be confiscated
if the did not.
The central bank started giving liquidity support to troubled
banks in January to help them face down runs on deposits due to
plunging confidence in the sector.
The central bank is believed to have channeled more than Rp
140 trillion in liquidity support to commercial banks.
Last month the authority suspended the operations of three
banks, including Bob Hasan's Bank Umum Nasional, which were
deemed to have no prospect of rehabilitation. Four other banks,
including the country's largest Bank BCA and Bank Danamon, were
nationalized.
These banks had received liquidity support equivalent to more
than 500 percent of their capital.
Pande agreed that bank owners who had been proven to have
misused liquidity support, including to speculate on the
currency, could be sent to jail, but reminded authorities that
hastiness of their part would blow the issue out of proportion
and lead people to distrust all bankers.
He explained that some bankers were actually professional and
their banks needed liquidity support not because of mismanagement
but because of the crisis.
"Will they (the good bankers) also have to face the Attorney
General?" he asked.
Liquidity support was also given out prevent a collapse in the
banking sector in the wake of plunging depositors' confidence, he
said.
"There is an impression that Bank Indonesia has giving all the
responsibility to commercial bankers," Pande said, adding that it
would be impossible to recover a large part of the liquidity
support and that bankers might only be able to return non-cash
assets.
He also said that hasty measures were usually short-lived, and
had proved to be an ineffective way of stamping out banking crime
in the past.
He urged the government to come up with systematic measures to
deal with violations of the legal lending limit and massive non-
performing loans, which could amount to 50 percent of all
outstanding loans or more than 40 percent of the country's gross
domestic product (GDP).
The central bank issued a decree in 1993 obliging banks to
lower their intra-group lending to below 20 percent within five
years, but this ruling was largely ignored.
Former central bank governor Soedradjad Djiwandono told
bankers in 1995 that those who failed to follow the decree by the
end of 1997 would be brought to court for breaching the legal
lending limit. If found guilty they could be jailed for six years
or fined Rp 6 billion under the 1992 Bank Law.
The government, however, has to date not sanctioned negligent
bankers, although the Attorney General exaggerated the importance
of the questioning of a number of allegedly corrupt bankers, and
the police boasted that Soeharto's son Bambang Trihatmodjo would
also be summoned for interrogation. (rei)