New bank regulations welcomed

New bank regulations welcomed

JAKARTA (JP): Analysts and a legislator yesterday hailed Bank
Indonesia's new regulations but warned it not to be over-zealous
in screening the shareholders and management of banks.

Laksamana Sukardi, a noted banking analyst, said that the
central bank's regulations, requiring banks to provide the
central bank with annual operational programs, was an appropriate
step towards increasing professionalism in the banking sector.

Under the regulations announced on Monday, the annual programs
should include projections on the amount of funds to be raised,
and on the channeling of funds as loans, fee-based services and
product development.

"The ruling is timely, given the fact that many banks still do
not have any firm plans," said Laksamana, a former banking
executive who is now the treasurer of the Indonesian Democratic
Party.

Riyanto Sastroatmojo, another banking analyst, said that the
requirement on the provision of an annual program might curb
unfair competition because all banks will have to adhere to their
own plans.

"Banks will operate more cautiously and that is good for all
the banks in the country," he said of the new regulations, which
were issued to support the implementation of the new banking law.

"The requirement to submit an annual program is in line with
the central bank's prudent banking policy," he said.

The central bank's new regulations also provided a definition
of those barred from becoming shareholders or members of the
executive boards of banks. This includes former shareholders and
executives who have been involved in bank fraud as well as people
who have defaulted on large loans.

Concern

Laksamana, however, expressed concern about the central bank's
loose definition of those to be blacklisted, saying it could lead
to "decisions based on personal like and dislike."

"The spirit of the regulations is good but care must be taken
in enforcing it," said Laksamana, a former executive of
Lippobank.

Civil rights

Barring people with a criminal record from bank management
might amount to a violation of civil rights, he said.

He said that a former banker who had served a jail term should
be allowed to get involved in bank management, especially if the
conviction was not related to fraud or manipulation.

Riyanto also questioned the ability of the central bank to
apply the regulations fairly, arguing that the broad definition
of those barred from the sector could result in the exercise of
partiality.

"I don't think the central bank has the courage to kick out
influential bankers," he said.

Another question, Riyanto said, is how to assess a person's
morality and how to decide when a person is harmful to a bank.

Sjaiful Anwar Hussein, a member of the House of
Representatives, said that the loose definition could be used by
the central bank to exclude only those it does not like.

"It is very normative and should be reviewed if partiality is
to be avoided," Sjaiful said.

Laksamana, Riyanto and Sjaiful also welcomed the central
bank's new restrictions on the sharing of information between
banks as important for protecting the privacy of bank clients.

One of the regulations issued on Monday provides that
information that may be exchanged on active debtors is limited to
their present debts.

Information on commercial banks can only be obtained through
the central bank.

Hendrobudiyanto, Bank Indonesia's director for supervision,
said that banks violating the regulations may be deemed to have
broken the banking law, which carries severe penalties in the
form of both fines and jail terms.

Speaking at a press conference marking the issuance of the
regulations on Monday, he said that third parties, such as the
press, who leak inter-bank information could face similar
penalties.

Laksamana, Riyanto and Syaiful all felt that such an
application of the regulation might discourage the press and also
others, such as legislators, from exercising their social
functions.

"Reviewing the new regulations is not sufficient. It is the
banking law that should be amended," Laksamana said. He added
that the article on banking secrecy in the banking law gives
stronger protection to debtors than it does to the public. (hdj/hen)