Saving the banks

Saving the banks

In these modern times, banks are at the heart of our economy.
If our heart stops functioning, we die. So with banks -- if the
banking industry collapses, our economy would be in ruins.

As such, there are rules about how to rescue the banking
industry if it stops functioning. There needs to be a financial
safety net to prevent the banking industry from becoming
illiquid.

With the completion of the tasks of the Indonesian Bank
Restructuring Agency (IBRA) on Feb. 27, the central bank and the
Finance Ministry will sign a memorandum of understanding on the
lender of last-resort program.

We cannot help but fear this program will be misused. The
central bank, Bank Indonesia's (BI) liquidity aid (BLBI) case is
an example of how a rescue program can be easily manipulated.

Every policy needs rules, requirements and standard operating
procedures. However, the most important thing is the people
behind the rules.

The emergency bail-out fund comes from the state budget, which
is actually the people's money. If the lender of last resort
program is misused, the people will suffer and bear the all the
costs -- such as in the BLBI case. -- Republika, Jakarta