Monitors needed

Article Abstract:

Deregulation of Indonesian private banks, which the country's central bank, Bank Indonesia (BI) initiated in 1988, will have to be brought under control if confidence in the banks is to be restored. The chief sign of chaos in Indonesian banking was the failure of Bank Summa in Dec 1992. BI's reckless policies, such as lowering the reserve requirement from 15% to 2%, helped cause Bank Summa's collapse with 70% of its assets being non-performing. How the government responds to the problems arising from deregulation will be crucial to further economic stability.

Finance, Deregulation, Bank Indonesia, P.T. Bank Summa

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Unhealthy states: Indonesia's government banks are ailing giants

Article Abstract:

Indonesia's Finance Ministry has been taking steps to improve financial management of state-owned banks. In exchange for $307 million from the World Bank, the ministry is pressuring state banks to reduce non-performing loans, currently 20% of the total, end 'memo lending' or politically influenced loans and report bad loans instead of hiding them. State commercial banks are not supposed to receive state subsidies after 1994. It may be difficult to impose discipline and lending limits without reducing credit so drastically that even legitimate projects suffer.

Cover Story, Economic policy, Indonesia. Ministry of Finance

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