Unfit and improper
Unfit and improper
Should a person who has failed a fit and proper test for the
job of leading a major government bank be allowed to retake it?
President Abdurrahman Wahid seems to think so. The President has
openly asked Bank Indonesia to conduct another test on a longtime
acquaintance, Prijadi Praptosuhardjo, for the position of
president of government-owned Bank Rakyat Indonesia (BRI).
While the central bank kept the result of the first test
confidential in keeping with regulations, the President's open
appeal made the information -- that Prijadi has failed the test
-- public knowledge. More than a question of breach of
confidentiality, however, the President's action amounts to
direct interference in the activities of Bank Indonesia, whose
independence is guaranteed by the 1999 law on the central bank.
The President thus made it two instances of interference in a
row, having first flagrantly attempted to unseat Bank Indonesia
Governor Sjahril Sabirin.
The test was a mechanism instituted in 1999 to prevent a
repetition of the rampant mismanagement that sent many banks to
near collapse following the financial crisis in 1997. The legacy
of that free-for-all banking era is still very much felt today.
Virtually every bank in this country, whether government or
privately owned, has fallen into the hands of the Indonesian Bank
Restructuring Agency (IBRA). Almost all of them too, including
BRI, have required massive financial injections from the
government to prevent them from folding. The massive cost of
bailing them out has been borne by taxpayers.
As part of the process of reconstructing the beleaguered
banking system, Bank Indonesia introduced fit and proper tests to
weed out bad bankers from the system. This mechanism is essential
because in the past loans were handed out on the basis of just
about everything except creditworthiness. Credits were doled out
on the basis of family ties and kinship or generous kickbacks,
and lending to companies within the same business group was the
norm. Needless to say, most of these loans were not backed up by
collaterals.
When the financial crisis struck the economy in 1997, many of
these loans were defaulted, sending virtually every bank in the
country to the brink of collapse in the process. While dozens of
banks have since been closed, the government has been forced to
bail out most of them, or face a total collapse of the banking
system. This has been a very expensive lesson in banking
management. It is therefore essential that Bank Indonesia now
thoroughly assesses the track records and characters of
candidates for directors of all banks, including BRI.
A person who has flunked Bank Indonesia's fit and proper test
is unlikely to pass it the second time around. This is not a
school exam, a university entrance exam or a driving test, which
one can take again and again until one passes. People flunk the
Bank Indonesia test because of their characters or their track
records. A second test is unlikely to change that.
President Abdurrahman's claim that he has known Prijadi long
enough to attest to his character is just one of the many inputs
that Bank Indonesia examiners take into account when conducting
their test on that candidate. While the government has every
right to appoint anyone it wishes to lead BRI, it must never push
for Prijadi's nomination against Bank Indonesia's recommendation.
This is not only for the sake of BRI itself but more for the
sake of the President's own future. The rate at which he has been
flaunting rules -- the BRI and BI governorship cases certainly
fall into that category -- the President is giving plenty of
ammunition to opponents and critics. Many of them are already
talking about turning the meeting of the People's Consultative
Assembly in August into an opportunity to impeach him.