Stakes in banks 'should be limited' to 20 percent

Stakes in banks 'should be limited' to 20 percent

JAKARTA (JP): The Federation of Private Domestic Banks
(Perbanas) called on the government yesterday to limit bank
ownership to no more than 20 percent.

The head of the association's advisory board, Thomas Suyatno,
told reporters the limitation would prevent banks from creating
policies merely to cater to their majority shareholders.

"Any bank shareholder must not have more than a 20 percent
share so that there will be no more majority shareholders,"
Thomas said after a hearing with the House of Representatives
Commission VIII for state budget and finance, research and
technology.

The limit is seen as a means to eventually improve bank
management.

It would also prevent practices in which bank majority
shareholders pressured bank managements to adopt policies which
could harm its public funds.

Currently, most domestic banks are largely controlled by
business groups or families.

Thomas, who is also a member of the commission, said the same
rule must apply to state-run banks as well.

The transition limiting bank ownerships must be conducted
within the next two years, before the country enters the
Association of Southeast Asian Nations Free Trade Area (AFTA) in
2003, he said.

The central bank would have to monitor the transitions to
detect any infractions by bank shareholders should the policy
come into effect.

Thomas said the phasing out of majority ownerships could be
done through mergers, consolidations and acquisitions, as well as
public share offerings.

Separately, banking magazine Infobank announced yesterday its
ratings of 215 commercial banks based on their 1997 financial
reports.

The 215 banks surveyed by include foreign and joint-venture
operations.

Best performers in 1997 include Hanil Tamara Bank, Bank Korea
Commercial Surya, Bank Harfa, Bank Global Internasional, Bank
Index Selindo, Bank Panin, Tokai Lippo Bank, Liman International
Bank, Bank Chinatrust Tamara and Bank Kesejahteraan.

Infobank managing editor Eko Budi Supriyanto said yesterday
the survey's only flaw was that it was based on the banks' 1997
financial reports.

Economist Sri Mulyani said that the financial reports would
not be enough to judge the banking industry, especially since
confidence in the sector was plunging and because of high
inflation.

"During times of high inflation, financial ratios do not mean
much," she said, adding that she was skeptical over the banks'
financial information because the sector had a poor disclosure
quality in the past.

The magazine also named 32 banks as unhealthy.

The magazine, however, said it may raise the number to 53
since another 21 banks, which had failed to disclose their 1997
financial reports by the April deadline, were suspected to be
unhealthy as well.

Those categorized as unhealthy include Bank Papan Sejahtera,
Deutsche Bank (Jakarta), Bank Rakyat Indonesia, Rabobank Duta
Indonesia, Bank Nusa International, Bank Central Dagang, Bank
Tata, Bank Ficorinvest, Bank Dagang Negara, Bank Dagang dan
Industri, Bank Bumi Daya and Bank Sewu.

The banks which failed to disclose their 1997 financial
results include Bank BNP Lippo Indonesia, Bank Credit Lyonnais
Indonesia, Indosuez Indonesia Bank and Bank Societe Generale
Indonesia. (das/rei)