Local banks warned of tough competition
Local banks warned of tough competition
JAKARTA (JP): Acting Governor of Bank Indonesia Anwar Nasution
warned local banks on Friday to be serious in improving the
quality of their human resources and technology or risk being
left out of the competition with the rising number of foreign
banks here.
Anwar said that Indonesia was attractive to foreign banks
because of the relatively large national savings level of around
17 percent of gross domestic product.
"Foreign banks have better technology. If we're not serious
about making necessary improvements, it won't take long for their
operations to expand even to remote places like Sipirok," he said
referring to his birthplace in North Sumatra.
Anwar was speaking at the 14th congress of the National
Private Banks Association (Perbanas).
"Citibank is everywhere. Even ABN Amro has opened a branch in
Manado. This will be a problem for you (local banks)," he said.
Anwar said that during the 32-year rule of former president
Soeharto, the human resources in the domestic banking industry
had not been creative.
He added that many banks had also been reluctant to invest in
technology because they could win lucrative businesses through
political connections.
But he said that the environment now was changing with Bank
Indonesia introducing the "fit and proper test," to prevent bad
bankers from reentering the industry.
Anwar said that some changes were now taking place in domestic
banks with the entry of foreign bankers onto the board of
directors as well as commissioners to introduce good corporate
governance in the banks.
He pointed out that foreign bankers have accepted positions in
Lippo Bank, Bank Danamon, and Bank Internasional Indonesia.
"Your business is about trust and information, so improving
the corporate culture is crucial," he said.
"It is not enough for banks to be recapitalized. You must
also upgrade your human resources and technology," he added.
The government has closed down a total of 66 banks since the
financial and economic crisis started in the middle of 1997.
The government also has injected more than Rp 600 trillion
worth of bonds to bail out the remaining banks.
Since the economic crisis, an increasing number of foreign
banks have entered the country and have been aggressively
expanding into places outside Jakarta.
Perbanas chairwoman Gunarni Soeworo admitted that foreign
banks had advanced technology and modern products, which could
seriously threaten local banks.
But Gunarni said that local banks could take advantage of
knowledge about local culture and habits in the competition.
"The problem is, if the government immediately withdrew the
blanket guarantee, would the public still put their money in
local banks," she said.
The government introduced the depositor guarantee program in
early 1998 to prevent massive runs on local banks. Under the
program, the government has guaranteed all obligations of closed
down banks including deposits.
The government has said that it would announce six months in
advance if it intended to withdraw the guarantee. Eventually, the
government plans to replace the guarantee with a deposit
insurance plan.
"I expect the government to be wise when withdrawing the
blanket guarantee," Gunarni said.
Meanwhile, one banker participant told Anwar that he was not
afraid of the competition with foreign banks as long as they
competed fairly.
He accused certain foreign banks of being unethical by
promising potential depositors a free-tax time deposit in their
overseas branches.
"I'm very encouraged when you say that you're not afraid of
the competition. That's what I like to hear," Anwar said.
"As long as you know your market niche, you will be safe," he
said.
Anwar also asked bankers to inform him of any violations
committed by foreign banks. (rei)