Tighter control for state banks

Tighter control for state banks

JAKARTA (JP): Minister of Finance Mar'ie Muhammad said yesterday that consolidation measures in state-owned banks will continue despite improvement in their performance in the last two years.

The minister said the consolidation measures, introduced in 1993 following a disclosure of their massive bad debts, are aimed at turning them to professional business entities.

Following the appointment of new senior officials of state- owned companies, the minister said that supervision over the state-owned banks' operations will be also strengthened in a bid to minimize red tapes.

The newly appointed officials include Arifin, installed as chief commissioner of Bank Dagang Negara (BDN), Sarmono as chief commissioner of Bank Negara Indonesia (BNI), Umar M. Said as chief commissioner of Bank Bumi Daya (BBD) and Mursabdo as chief commissioner of Bank Ekspor Impor Indonesia (BEII).

The other new appointees are Hardjono and Mursono Siswohardjono, who were installed respectively as chief commissioner and president of PT Kawasan Berikat Nusantara, an industrial bonded zone managing company.

"Commissioners of banks should restrain from interfering the administrative task of the executive boards, despite the stricter control commitment," he warned.

Losses

State banks reported great losses in 1993 due to an increase in their bad debts as a large amount of their credits had been extended to unfeasible projects.

Sources said the massive amount of bad debts occurred as many executives of the state-owned banks plotted with borrowers to default the credits, while commissioners, mostly comprising of senior government officials, often compelled the management board to provide credits according to their favor.

The activities of the state-owned banks are likely to remain stagnant on the impact of the consolidation measures.

The state banks, comprising of BDN, BNI, BBD, BEII, Bank Tabungan Negara, Bank Rakyat Indonesia and Bank Pembangunan Indonesia, control around 50 percent of the lending market.

The credit expansion of the state-owned banks, which reached over 10 percent in 1991 and 1992, declined to eight percent in 1993 and around eight percent last year, as compared to the growth between 20 and 25 percent recorded by private banks.

The combined expansion of total bank credits, for a comparison, reached around 22 percent last year.

Subagyo Karsono, the president of BDN, said the consolidation measures in his bank would last for another two years.

"The measures are important to give the bank more room for future expansion," he said, adding that the improvement of information technology and human resources are priorities of the bank's restructuring program.(hen)