Banking Sector

Liquidity Consortium Should Be Set Up

VIVAnews - The Indonesian Chamber of Commerce (Kadin) urged the central bank, Bank Indonesia, to immediately form a pooling fund or liquidity consortium to manage the shortage of liquidity which is affecting banking industry, refelcting from the measure taken by the central bank which liquidated IFI Bank last week.

"The deficit had affected IFI Bank. If the banking liquidity cannot be recovered, business community fears there will another bank suffering from bankruptcy," Head of the Fiscal and Monetary System Committee at the Indonesian
Chamber of Commerce Bambang Soesatyo told VIVAnews in Jakarta on Sunday, April 19.

Soesatyo said the liquidation of IFI bank showed that the financial crisis has really had deep effect on the domestic economy. The impact has also affected the workers and increased the non-performing loans in housing sector due to payment failure from the laid-off workers.

The downturn in the real sector is worsening as well taking into account the declining volume of exports to 30 percent. It helped raise non-performing loans in many companies due to significant cutback in people's consumption.

The monetary authority needs to restore the financing sector to avoid the crisis from falling further. Meanwhile, the fiscal authority must also improve the function of the State Budget by optimizing budget absorption.

To prevent other banks from being liquidated, Bank Indonesia must help recover inter-bank loan transaction and realise pooling fund as short-term solution in handling the shortage of liquidity. So far, the domestic financing sector has been in a poor performance inasmuch as the leakage of liquidity in the banking sector, which results in the high interest rate in loan interest rate and fixed deposit.

The Chamber of Commerce also suggested that the pooling fund also goes hand in hand with the liquidity support from major banks. The short-term financing facilities for the new institution can be acquired from the central bank. "The
liquidation of IFI Bank has somewhat smeared the image of our financial and financing sectors," he said.

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Translated by: Ariyantri E. Tarman

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29 Maret 2024