Liquidation of banks hailed

JAKARTA (JP): Businesspeople and economists hailed the government's bold move to liquidate 16 insolvent banks, but urged tougher measures against existing troubled banks.

Sofjan Wanandi, chairman of the Gemala Group, said the move should serve as shock therapy for the country's debt-plagued commercial banks.

"It sends a strong message to owners and managers of surviving ill-fated banks to improve their performance by abiding by prudent banking practices," Sofjan said.

The government must also convince the public that remaining banks were sound so that depositors would not rush existing local banks, he said.

He predicted, nevertheless, that there would be more mergers and acquisitions among banks to survive the tight competition.

Economist Sri Muljani from the University of Indonesia also welcomed the move but said the government still needed to work harder to reform the banking sector.

"This is a good start for Bank Indonesia to complete its difficult assignment to make all banks healthy," she said.

But she warned that it would not be easy to salvage existing debt-ridden banks amid the current economic downturn.

She suggested that the government impose strong penalties on bank owners who directed funds placed in their banks to their own businesses.

"Look, some bank owners can even enjoy money after they spend time in jail. Banking is about public trust. We cannot let such people continue to suck up public funds for their own benefit," Sri said.

But she warned that liquidation of the 16 banks might have a negative impact, like public panic and a run on other banks.

"The government must avoid this by issuing a transparent publication on bank ratings because even the most sound bank could go bust if it is rushed by its depositors," she said.

Anwar Nasution, also from the University of Indonesia, hailed the liquidation, but said it was late.

He contended that some of the liquidated banks had absorbed a large amount of funds from Bank Indonesia; nevertheless, they failed to perform.

"We have always raised this issue. Those banks should've been liquidated a long time ago, but instead they were maintained until last week. They had so many arguments, which were usually made in the name of the people.

"But reality is that there were many scandals and much collusion in spending the people's money to salvage those dying banks. We must stop this," he said.

Citing an example, Anwar said he had long proposed that Bank Pacific be liquidated. But instead of stopping its operation, Bank Indonesia injected fresh funds into it and placed its people at Bank Pacific, which eventually went bankrupt.

"The question is, how much of the people's money has been wasted at Bank Pacific?" Anwar queried.

Nevertheless, he hailed the government's brave decision to liquidate the 16 banks.

He called on the government not to play favorites in liquidating banks and to maintain tough measures against banks which were not managed prudently.

Christianto Wibisono, chairman of the Indonesian Business Data Center, said the move to close insolvent banks would teach the public to place their meager incomes in healthy banks.

"This will improve public trust in the government. But the government must be firm and say that there will be no second phase of liquidation. Otherwise, the public will think that there will be liquidation of additional banks," he said.

He suggested that the government expedite the creation of a fund to reimburse small depositors in case a bank was liquidated.

Hashim

Meanwhile, Hashim S. Djojohadikusumo, chairman of the Tirtamas Group, expressed yesterday his regret over the closure of Bank Industri in which he owns a 4 percent equity stake.

Hashim explained in a statement that Bank Industri is 60 percent owned by the Pension Fund Foundation of Bank Rakyat Indonesia, 24 percent by Herry Widjaja, 8 percent by Mrs. Siti Hediati Prabowo, 2.4 percent by Okie R.Lukita and 1.6 percent by The Tje Min.

The statement said Hashim and Mrs. Prabowo had at various times offered to increase their capital in the bank but other shareholders were reluctant to accept the gesture.

The statement quoted Hashim and Mrs. Prabowo as confirming that they had fulfilled all obligations and did not have any outstanding debts to the institution (Bank Industri).

The statement added that all banks controlled by the Tirtamas Group -- Bank Niaga, Bank Papan Sejahtera, Bank Kredit Asia and Bank Pelita -- had been certified by Bank Indonesia (central bank) as healthy. (08/icn/rid/vin)

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