Fresh maneuver on state banks bad loans
As I wrote many times in the past, the major problem for bankers at the state-owned bank in Indonesia is bad loans management amid contradiction of existing laws. The banking law allows banks to give haircut or write-off bad debts. But that's not the case for state-owned banks because of the anti-corruption law article 2 and Law No. 17/2003 about State Treasury.
Attorneys could use article 2 of the Anti-Corruption Law to file corruption charges against bankers of the SOE banks simply because haircut and write-off could be considered a crime against the state because such decisions potentially put the state at financial loss. Meanwhile, the Law No.17 also dictated that state banks should not sell their non-performing loans (NPL) at discount price just like the private-owned banks.
Under such circumstances, the bankers have no guts to manage their NPL even at the alarming level of Rp87 trillion (US$9 billion) in one state-owned bank. These bankers then proposed to establish special purpose vehicle (SPV) to manage the NPL. But that's not the answer. As long as government keep the definition that all the money in a state-owned bank are the state's money, no matter the bank do itself or let SPV do the haircuts and write-offs, prosecutors would still wait next door.
The ministry of finance seems aware of these and come up with bold idea of dividing line, which assets are the bank's assets and which assets are the state assets in the bank. So, NPL would then be categorized as the bank's asset, not the state's.
What to do? Director General for State Treasury Mulia P. Nasution said government is revising the Government Regulation No. 14/2005 about the Settlement of State Receivables. Is it enough? Actually it's not. We need to settle once for all the definition of state asset in a state-owned bank or other state-owned enterprises. Government, Bank Indonesia, and Attorney General's Office should settle the issue if the country want to empower its state-owned enterprises.
Why?
Because even if government revise the regulation, the hierarchy of the government regulation is still below the Laws. Look at what happened with Indonesia Bank Restructuring Agency (IBRA). Former chairman Syafruddin Temenggung is detained for corruption allegation on selling one of the assets at discount price. We need to fix the higher legislations, the laws. IBRA was governed with government regulation and presidential decrees.
I'm afraid revision of government regulation on NPL management would not enough. That would settle the issue in the short-term, but not in the long run.
Attorneys could use article 2 of the Anti-Corruption Law to file corruption charges against bankers of the SOE banks simply because haircut and write-off could be considered a crime against the state because such decisions potentially put the state at financial loss. Meanwhile, the Law No.17 also dictated that state banks should not sell their non-performing loans (NPL) at discount price just like the private-owned banks.
Under such circumstances, the bankers have no guts to manage their NPL even at the alarming level of Rp87 trillion (US$9 billion) in one state-owned bank. These bankers then proposed to establish special purpose vehicle (SPV) to manage the NPL. But that's not the answer. As long as government keep the definition that all the money in a state-owned bank are the state's money, no matter the bank do itself or let SPV do the haircuts and write-offs, prosecutors would still wait next door.
The ministry of finance seems aware of these and come up with bold idea of dividing line, which assets are the bank's assets and which assets are the state assets in the bank. So, NPL would then be categorized as the bank's asset, not the state's.
What to do? Director General for State Treasury Mulia P. Nasution said government is revising the Government Regulation No. 14/2005 about the Settlement of State Receivables. Is it enough? Actually it's not. We need to settle once for all the definition of state asset in a state-owned bank or other state-owned enterprises. Government, Bank Indonesia, and Attorney General's Office should settle the issue if the country want to empower its state-owned enterprises.
Why?
Because even if government revise the regulation, the hierarchy of the government regulation is still below the Laws. Look at what happened with Indonesia Bank Restructuring Agency (IBRA). Former chairman Syafruddin Temenggung is detained for corruption allegation on selling one of the assets at discount price. We need to fix the higher legislations, the laws. IBRA was governed with government regulation and presidential decrees.
I'm afraid revision of government regulation on NPL management would not enough. That would settle the issue in the short-term, but not in the long run.
READ MORE!!!
posted by yosef at 7:53 AM
1 Comments:
Thanks for the post, Yosef. So let me get this straight, who then can give pressures for this law to be written? It seems like these powerful/rich people are always above the law...I really have no clues :-)
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