Private banks start seeking govt guarantee
JAKARTA (JP): Dozens of private domestic banks started seeking Bank Indonesia's guarantee on their liabilities to lure back depositors yesterday.
Masyhud Ali, president of Bank Putera Multikarsa, said executives or owners of local foreign exchange banks signed agreements with Bank Indonesia, the central bank, yesterday to secure the guarantee.
In exchange for the guarantee, he said, banks were committed to paying a half-year fee of 0.05 percent of the guaranteed deposits and debts and limiting their loan growth to 2 percent per month.
"I am happy with this government guarantee because difficulties we face now could not be handled by each individual bank. The problem is so big and in fact started from outside the banking system," Mashud told The Jakarta Post.
Bank Indonesia banking supervision director Mukhlis Rasyid said banks would still have time until Feb. 4 to sign an agreement with Bank Indonesia.
He said the guarantee would apply equally to all state, private and joint-venture banks -- but not foreign bank branches.
He said the fee collected from commercial banks would not be returned to them but would be used to initiate the planned deposit insurance system.
The government said Tuesday it will stand by troubled banks and fully guarantee all deposits and debts, an announcement seen by analysts as an important first step to strengthen the shaky sector.
"It should restore confidence, but it takes time. It is just the beginning, but it is definitely in the right direction," said Tom Inglis, a banking analyst at ING Barings Securities Indonesia.
He said the government should quickly implement the reforms by issuing necessary rulings and guidelines on how troubled banks should be treated.
Nyoman Moena, chairman of the advisory board of the Federation of Private Domestic Banks, said the government would have no problem in adjusting necessary rules.
"I don't see there would be any problem in implementation as the government would have no problem in completing the measures with necessary legal adjustments," Moena said.
Indra Bambamg Utoyo, vice chairman of House of Representatives Commission VIII on state budget and finance, said the government must succeed in implementing the newest banking reform program if it did not want to see the rupiah sink further.
"I see this massive reform the last alternative available. If this measure fails, I don't know if there is any other alternative available," Indra said.
He said if the reforms were fully implemented, they would restore public confidence in the banking system, people would bring back their money into the system and foreign banks would reconnect their broken credit lines with local banks.
Indra and Moena agreed that the government should complement massive economic and banking reforms with reforms in other sectors, especially in politics, to arrest the free fall of the rupiah.
They said the continuing free fall of the rupiah was not solely driven by economic matters but also by social and political concerns.
"But don't forget about other factors, especially noneconomic factors like politics. They are stronger in influencing the financial market," Moena said.
"Noneconomic factors could easily overrule all massive economic reforms introduced by the government thus far," Indra said.
The rupiah closed at 9,850/10,800 against dollar in Jakarta compared to an opening of 10,500/11,500 in the morning. The rupiah's current level represents a 78 percent drop in value since early July.
Both Moena and Indra predicted that commercial funds would not return to Indonesia soon after the government gave blanket guarantees on bank depositors and creditors, but after the March presidential election. (rid)