Govt under fire over banking policy

Govt under fire over banking policy

JAKARTA (JP): Former finance minister Fuad Bawazier on Friday
doubted the effectiveness of the country's costly bank
restructuring program, accusing the government of not being
serious about cracking down on banking crime.

He also attacked the government's banking policy as lacking
transparency.

"If this condition goes on, there won't be any significant
change (in the banking industry)," he told a discussion on
banking crime, organized by the Perbanas banking institute.

Fuad said the government had so far failed to take firm
measures against delinquent bankers, who are partly responsible
for leading the banking sector into its current trouble.

But deputy attorney general Soehandojo argued at the
discussion that prosecution of bad bankers and bad debtors had
been slow because of the difficulties in finding hard evidence.

"We must have strong evidence to convince the judge before
taking someone to court. We can't just take someone based on
indications. It's unlawful," Soehandojo added.

The central bank last year injected about Rp 150 trillion
(US$18.75 billion) in liquidity support to help banks meet
massive withdrawals by depositors when confidence in the industry
was at its lowest.

Although the bank owners surrendered a large number of fixed
assets to repay back the loans, many have demanded that
authorities take legal action against bank directors and bank
owners who breached bank rulings, including by excessive lending
to affiliated business groups.

Fuad again urged the government to disclose the names of the
bad bankers.

But the government turned down the demand. It instead
announced that 172 bankers were barred from traveling overseas,
to facilitate a future investigation.

The government's bank restructuring program has resulted in
the closing down of 64 banks since November 1997.

The government will provide 80 percent of the recapitalization
funds, estimated at more than Rp 300 trillion, for qualified
banks.

The government is also trying to recover the massive amount of
non-performing loans owed by the 20 largest debtors of the seven
state banks and major private banks.

But the public is increasingly doubtful of whether credible
legal measures could be taken against the bad debtors, who are
mostly well-connected businessmen, including the sons and
daughters of former president Soeharto.

The Indonesian Bank Restructuring Agency (IBRA) has been
tasked with recovering more than Rp 220 trillion in non-
performing loans.

IBRA complained recently that it was having difficulty
recovering the loans quickly as the agency had not received all
related documents, particularly from debtors of the state banks.
(rei)