Govt should take over recapitalized banks

JAKARTA (JP): The Center for Banking Crisis and the Indonesian Exporters Association urged the government on Thursday to take over all large recapitalized banks and revamp their management to minimize risks.

Deni Daruri, president of the center, said the government would control 90 percent of Bank Internasional Indonesia (BII), Bank Lippo and Bank Universal under the multibillion dollar recapitalization program but was still reluctant to take over the management.

"I suspect there is something wrong going on. I suspect that is only a move from Bank Indonesia to protect certain groups of bankers. We can not accept that," Deni said.

"So, why not just take over these banks?"

Rudy Lengkong, executive director of the exporters association, added that the government's decision to inject a huge fund into the private banks must be challenged.

Otherwise, people would again bear all the burdens if the banks' managements misuse the funds.

"That kind of decision is not helping educate bankers because they have made their banks go under, but the government still bails them out."

"Does Bank Indonesia have the mechanism to control that huge amount of money. What if the money goes out of Indonesia? What if the management and/or owners use the money to finance their cash- strapped projects? All of it is so unclear to me."

The government announced on Wednesday that it would start recapitalizing eight private banks later this week, including BII, Bank Lippo and Bank Universal.

BII would receive the largest government privatization funding of Rp 8.7 trillion (US$1.1 billion), followed by Bank Lippo with Rp 7.73 trillion and Bank Universal Rp 4.59 trillion. With that funding, the government would control 90 percent shareholding of each of the three banks.

In addition, the government would also inject recapitalization funds of Rp 2.34 trillion into Bank Bali, Rp 380.8 billion into non-listed Bank Bukopin, Rp 615.4 billion into Bank Prima Express, Rp 130 billion into Bank Artha Media and Rp 52 billion into Bank Patriot. The government's shareholding of these banks averages 20 percent.

Bank Indonesia governor Sjahril Sabirin said at a banking seminar on Thursday that the government's 90 percent capital injection into the three banks would not translate into a takeover of the banks management.

"Only the ownership changes, not the management," he said, pointing out that a recapitalized bank is different from a bank that has been taken over because in the latter case the government also takes over the management.

Judging from its decision, Deni said, Bank Indonesia was still not independent, as it was still strongly influenced by government officials which had political connections with owners of the banks.

"Renaming Bank Indonesia's board of directors into the board of governors is not enough. Even establishing a law which guarantees the independence of Bank Indonesia also is proven not enough. It needs the will of all parties concerned to make Bank Indonesia independent.

"If it is really independent, it would pursue the best solution for all the people of Indonesia, not for certain groups of bankers."

Deni said the track records of some people at BII and Bank Lippo management weren't good, but nobody knows why the government still entrusted them to manage the government's money through the banks.

Rudy Lengkong agreed and said that some people sitting in the board of management at BII were from the Widjaja family controlling the Sinar Mas Group, while those in Bank Lippo were from the Riady family controlling the Lippo Group.

"The Sinar Mas Group has their own projects and the Lippo Group has their own projects also which currently lack funding. So, it is logical if we suspect that the money is likely to be used to finance their projects."

Therefore, he said, the injection of huge funds into the private banks would not automatically drive up significant economic activities in Indonesia.

He said that the government should prioritize the recapitalization of state banks, as they had no business group interests, and the establishment of a state-owned financial institution specializing in export financing. (rei/rid)