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)