Monday, 8 July 2013


Ex Bank Indonesia Governor Darmin Nasution stated that BI’s controling function had been well undeway where not a single problematic bank escaped from control. The point was that not a single problematic bak escaped from control. The point was that not a single bank in this Republic which escaped BI’s control. This was disclosed by Darmin Nasution on the occasion of Farewell Reception with the press upon terminating his office at the BI Building Jakarta on Monday last week [20/5].

Darmin disclosed that he had been improving control and examination system on banks intensively. Meaning now there were no longer problematic banks. According to Darmin, there should be no hesitation about tackling troubled banks in this was done by analyzing the core problem before trying to find the right solution formula.

Beside controlling the banking sector, there were other tasks to be accomplished and great challenges to be faced in time to come but there were high expectations that BI’s new Governor, Agus Martowardojo could perform hid duties well. As known, Darmin Nasution had completed his office as Governor of BI on May 22 last and to be succeeded by Agus Martowardojo who was installed by the Supreme Court of Justice on May 24 last.

One thing was sure the new BI Governor had to face broad challenges in the future to watch on, among others challenges in the monetary sector, financial and banking system, and payment system system. All were related to the real sector, and the domains were interrelated. To meet the varied challenges, organization wise BI must be flexible, either in making policies or in coordinating with all stake holders.

On the other hand BI needed to be strong in dealing with the complexity of problems. In this case BI was called for to foster collaboration with the government. BI challenges in the monetary sector was to maintain price stability and Rupiah exchange rate value to ensure sustainable and inclusive economic growth. This was not easy because there was capital inflow which was volatile, fluctuative Rupiah value, deficit current transaction and inflation from volatile foods.

One noteworthy thing was that since early 2012 last the polematics over price thing was that since early 2012 last the polemacs over price of subsidized oil triggered inflation expectation, and made Indonesia lose the investment grade rating. On the other hand the worsening balance of payment and high inflation influenced market players; a condition as such must be watched on.

Positive response came from the House who stated their optimism that Agus Martowardojo would be able to fulfill his commitment to continue policies of BI which had been well underway. The Parliament did not forget to express their high appreciations to Darmin Nasution who was rated as having enhanced high performance in BI.

The Parliament rated that under the leadership of Darmin Nasution BI had succeeded in setting its benchmark. Even in the discussion with Commission VI of House as BI’s proffessional partner, Darmin had built firm foundation to issue sound policies. Again they stressed that BI’s policies were of high quality and properly exercised by BI’s Board of Governors especially in terms of interest, the reciprocal principle and financial inclusion.

According to House, the measures taken by Darmin Nasution in leading BI already respresentedpeople’s aspirations, including the people’s representative in House. Moreover, many of BI’s policies were popular and was able to bring positive change to the banking sector in Indonesia.

In regard to the principal of equity or reciprocal, it could be homework for the new BI Governor to accomplish the task. This issue became critical when many BUMN banks wished to expand their wings overseas, at least in the ASEAN region. Opportunities of BUMN banks were great in Singapore, provided they were given convenience by the Singaporean Government to expand their activities.

In a meeting with Commission XI of House recently, BI started that they suspended permit application for a\acquisition of 67 percent of Bank Danamont’s capital by DBS Group until the Monetary Authority Singapore [MAS] make their commitment of reciprocal for 3 BUMN banks in Singapore.

Darmin Nasution stated that basically BI was only in a position to permit for acquisition of Bank Danamon by DBS Group 40 percent of total shares based on BI Regulation on shares ownership of banks released last year. If DBS requested to acquire 67.37 percent, BI needed discretion or leniency. On that basis BI would also demand leniency to MAS for 3 BUMN banks, i.e. Bank Mandiri, BRI and BNI to be allowed to expand business to Singapore.

The executives of BUMN banks appreciated BI’s step to make a reciprocal agreement with Singapore in the case of acquisition permit for Bank DBS Group and Bank Danamon. However, they also questioned when BI could demand the same thing to the Malaysia Central Bank. This was related to the condition where Malaysian banks were free to expand business in Indonesia, while Indonesian banks trying to expand to Malaysia had to meet hard pre-requirements.

In case of Singapore, they were basically protective, but the precondition set forth by BI to MAS when DBS Holding Group could acquire 67.4 percent of Bank Danamon’s shares was rated by many parties as appropriate. BI demanded the Singaporean authorities to ease conditions to Indonesian BUMN banks to operate in Singapore if DBS wished to acquire Bank Danamon’s shares.

Furthermore there was Bank Mandiri who stated they wished to get permit to become Qualified Full Branch [QFB] of Singapore Central Bank [MAS] just as received by foreign banks from Malaysia, India, and China. Meaning Bank Mandiri was allowed to open at least five branch offices, open ATM in at least 10 locations which were self stipulated, also allowed to access retail consumers, allowed to join local ATM network with same pricing as local banks.

However, Bank Mandiri requested that QFB permit from MAS must meet the same capital requirement as other banks which were earlier in operation, not the new standard requirement which was increased after the DBS transaction was forwarded but stagnated. There should be no conclusion that MAS was holding back bank expansion from Indonesia to those countries, then apply new capitalizing regulation which seemed to make it difficult for Indonesian banks to enter Singapore’s market.

In mid year last year MAS revised QFB requirement of Singapore. One of the requirements was that QFB must possess capital of at least 1.5 billion S$ or equal to Rp11 trillion. In regard to the principle of equity bilaterally, the point was that BI willing to give discretion, but other countries must also allow equal thing, by prioritizing national economic interest and stability of national economy.

Such was perhaps some last issues to be followed up by the new BI Governor Agus Martowardojo. Congratulations, Mr Martowardojo. (SS).      

Business News - May 29, 2013                   

No comments: