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.