Mochtar blasts BI's bank rescue policy

Mochtar blasts BI's bank rescue policy

JAKARTA (JP): Mochtar Riady, a senior executive of a major
business group, said here yesterday that Bank Indonesia's policy
of rescuing the country's ailing banks may only worsen the state
of the banking sector.

Mochtar, founder and chairman of the Lippo Group which
includes one of the largest banks in the country, said the
central bank's program to strengthen domestic banks only catered
to banks which already had acute problems.

"Ironically, banks with problems are taken care of and rescued
but those that are healthy and are not under IBRA (the Indonesian
Bank Restructuring Agency) are being neglected," he said at a
meeting with leading members of the Chamber of Commerce and
Industry (Kadin).

IBRA was set up by the government in January to restructure
the banking sector, and is currently overseeing 54 banks,
including seven that were suspended last April.

Mochtar said Bank Indonesia (BI) only acted as the lender of
last resort to help banks when the banks suffered problems in
their clearing operations.

Banks with positive accounts, however, were ignored and they
were even not allowed to cash in their deposits at the central
bank when they needed them, he said.

He cited the recently rocked Bank Central Asia (BCA),
Indonesia's largest private bank, as an example of a bank that
could have been saved had BI stepped in to help it earlier, he
said.

"The central bank's policy did not help save BCA at a time
when the bank was vulnerable to rumors that were "engineered" to
shake it so that BCA had to restrict withdrawal amounts, he said.

"Why did BCA not get rescued before the situation got so bad?"
he asked, adding: "I'm sure that the BCA's turmoil was
engineered."

But he said he did not know who could have been behind the
scenes, saying they must have been "people who want to see the
economy collapse".

Mochtar, a former president of BCA, said many of the people,
who formed long queues at BCA's Automatic Teller Machines in the
beginning only withdrew small amounts of money.

The appearance of a bank rush from these long lines triggered
panic among other customers who then began rushing to the bank,
he said.

The management of the country's largest bank was taken over by
IBRA last month, following massive withdrawals by customers which
continued for a week after former president Soeharto stepped down
on May 21.

The Salim Group owns 70 percent of the bank, while Soeharto's
children Sigit Hardjojudanto and Siti Hardijanti Rukmana own the
remaining 30 percent.

Mochtar also said the restructuring of the banking industry
was crucial to the survival of the private sector.

The current tight monetary policy had suffocated the country's
private sector and it would cause many companies to go bankrupt,
he said.

Also attending yesterday's meeting was economists Sjahrir, Sri
Mulyani and Pande Radja Silalahi, and the chairman PT Jamu Jago,
Jaya Suprana. (das)