VIVAnews – In 2009, the threat of a new banking crisis is far from over. Banks are still facing liquidity problems as they did in 2008. Century Bank was the first victim of liquidity crunch last year.
How about 2009 projections? To get more insight about the issue, VIVAnews interviewed Sigit Pramono, the Chairman of the National Banks Association (Perbanas). The following are the excerpts of the interview:
What challenge does the banking sector face in 2009?
Currently, most banks are facing liquidity problems, both in rupiah as well as in foreign currencies, and this sort of problem will remain a major issue in 2009. Rupiah liquidity has even worsened, since some banks have excess rupiah liquidity, while others do not. The jammed inter-bank loans will also remain a major issue. It’s not a particular issue between state-own banks on one hand and private banks on the other, or small ones versus large ones. (Remember) each bank has its own customers. However, it’s obvious that some banks have a huge amount of liquidity.
What are the obvious indicators?
The obvious indicator was the increase in the amount of third-party funds from Rp 1,603 trillion (US$144.43 billion) in September to Rp 1,678 trillion (US$151.18 billion) in October, an increase of Rp 75 trillion (US$6.76 billion). Ironically, this substantial increase was still concentrated on several large banks since the key factor behind the increase was the allocation of government’s development fund.
Will a case like Century happen again?
I can’t answer that. However, we have to be cautious and we need to closely monitor the banks. (Usually) before a crisis emerged, some banks are actually in the middle of it already. However, this fact remains secret and only saw them after the crisis hit.
How many are there?
Indeed, there are certain banks that need to be closely monitored. These banks’ Capital Adequacy Ratio (CAR) is below 12 percent, and their non-performing loans (NPLs) are above 5 percent, while the average NPL for bank is 4 percent. There are around 19 to 20 banks. Nevertheless, please do remember that this doesn’t mean that they are in trouble. It’s just that we have to be cautious before it eventually happened.
Does this mean that our banking conditions are still under threat?
The truth is, regardless of disagreements between the stakeholders, the government should guarantee interbank loans as soon as possible. So, banks would not be hesitant in lending their excess liquidity to other banks.
Has the Central Bank (BI) tightened its supervision to monitor these banks?
Actually, Bank Indonesia’s (BI) supervision is much better compared to 10 years ago. However, BI indeed has to tighten its supervision by analyzing the CAMEL (capital, assets, management, earning, and liquidity). How is the bank’s condition in terms of its capital, assets, management, performance, and liquidity condition? The Central Bank has to be determined in punishing certain bank owners who refused to increase their capital.
How about non-performing loans?
NPL is one of the major threats in 2009. A single case like Indover could actually jam the loans of a number of banks. Exporters who fail to win any export orders from foreign buyers may also become a threat. These loans have the potential of turning into bad debts, thus adding to the banks’ NPL ratio.
Are there any signs that the NPL is growing?
Although data for December is not yet available, signs of NPL increase in December were already obvious, especially due to Indover case.
Given this situation, what should banks do in 2009?
Of course, in addition to being careful, banks should be more selective in choosing customers and in considering which sector has better risk.
How about the loan growth in 2009?
If the loan growth to support the 2009 growth economy is around 4.5 to 5 percent, then the bank loans will grow around 18 to 20 percent. This refers to 2008 data.
Translated by: Edwin Solahuddin
