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)