Govt should take over recapitalized banks

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)