TARIF to fortify country's banking sector
TARIF to fortify country's banking sector
Tony Hotland, The Jakarta Post, Jakarta
Transparency, accountability, responsibility, independence, as
well as fairness, are essential prerequisites for the country's
banking sector to achieve good corporate governance.
These basic issues, abbreviated to TARIF, will ultimately
strengthen the endurance of a bank, according to top banking
practitioners during a seminar titled Into Sound and Credible
Banking Through Effective Corporate Governance, last week.
Chief commissioner, Binhadi, of the country's largest bank in
terms of assets, Bank Mandiri, said the four principles were
necessary if a bank wanted to win public trust.
"Public trust is the most important and an irreplaceable
element for a bank to grow healthily," he said.
Transparency, said Binhadi, meant that a bank could provide
accurate financial information at any time, while accountability
called for consistent performance measures, future objectives and
a reward and punishment system.
He explained that a bank had to comply with the principles of
prudential service as a sign of responsibility, and be
independent in making decisions.
Seconding Binhadi's opinion, chairman of the Association of
State-Owned Banks (HIMBARA) Rudjito said that one of the ways to
develop good corporate governance was by addressing the level of
corporate teamwork.
"It requires a good example from the leaders, for example by
those in the central office, for branch officials to achieve a
coordinated performance," he said.
Rudjito, who is also the president of Bank Rakyat Indonesia
(BRI), added that the use of "reputation agents", such as public
accountants, investment advisors and corporate governance
analysts, should be exploited to the fullest extent.
He took the view that ineffective law enforcement on money
laundering, insider trading and corruption were a barrier to
achieving good corporate governance in the banking sector.
"We need stricter law enforcement for violators of good
corporate governance practices, and banks must start applying
built-in control mechanisms in implementing it," said Rudjito.
He asserted that it would hardly be possible for banking as a
subsystem in a society to absorb such practices well unless the
wider society concurred.
Director of licensing and information at Bank Indonesia (BI)
Siti Fadjrijah commented that external supervision could improve
good corporate governance in a bank, although the commitment
basically relied on bank management.
"The government, auditors or the banking association surely
have major roles in supervising the implementation of such
practices in a bank," she said.
BI, said Siti, had been issuing preventive regulations to
establish a standardized measurement for a thorough assessment of
implementation of the practices.
Among the regulations are the necessity for a bank to carry
out tests of suitability on potential appointees, risk management
and internal control and an equalized internal audit.
Indonesia's banking sector has been struggling to recover from
the impact of the devastating financial crisis in 1997. Dozens of
banks have been declared insolvent, with some merged and sold to
foreign investors.
Late last year, the reputation of two of the country's largest
banks, BRI and BNI, was damaged by money-losing scandals with the
disclosure of fictitious export credits and money embezzlement.