Tuesday, March 27, 2007

K(ch)eating on Indonesian banks

No doubt that Paul Keating is one of prominent political figures in the region. He was Australian prime minister for many years. But I never heard of Mr Keating as a banker. So, it's quite a suprise for me to read the long-form interview with Mr Keating published by Bisnis Indonesia today about the state of Indonesian banking industry. I'm not saying he is an overnight Indonesian banking industry analyst. Anyway, what he said?
Banks should be careful about capital adequacy ratio (CAR) and that the state should stay out of the business. That's normative. But expecting him to answer the following questions?
1) What do you think of Bank Indonesia's initiative to encourage the merger of small banks?
2) What do you think of bank's reluctance to finance real and micro sectors?
Mr Keating is not cheating on his answers for sure. But we really need to find the answers from the bankers, especially those who control small banks, on why they're reluctant to merge or to small medium entrepreneurs/investors on why they're reluctant to get the loans out of the banks even though they had signed loan agreements.



Anonymous Anonymous said...

You're absolutely correct....
Why did he come out with such opinion? Do u think it is a problem of knowledge? or another reasonable thing?

March 27, 2007 5:50 PM  
Anonymous Anonymous said...

His key point is that the State is a bad owner of banks. The evidence for this is global. Indonesia is no different and state banks have cost billions of dollars to the state (ultimately the taxpayer, who is very rarely the bad debtor!). Despite this government figures like ownership - it allows for future funding for political requirements. And so the cycle continues. The way to break the cycle is to close or sell the state banks. That is the national interest, not some narrowly defined nationalistic excuse for state ownership.

March 27, 2007 6:01 PM  

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