Two out of three expert witnesses before the legislature's inquiry committee on the Century scandal, Thursday, disagreed that the 2008 crisis triggered a systemic effect.
Hendri Saparini and Ichsanudin Noorsy stated that the crisis was a ripple effect from the crisis in the United States of America, and it didn't make the Indonesian banking precarious. "There is a connection, even if there was a lag time and it wasn't a direct effect. The crisis in the US and the on in Indonesia are different," stated Hendri.
The crisis transmission in 2008 was also different from the one in 1997-1998, especially since the Indonesian economic structure in 2008 was quite well ordered. In 1997-1998 there was monetary crisis while the world demand was high, in 2008 it's not like that.
"In 1997-1998 we had a fragile banking industry, the CAR (Capital Adequacy Ratio) was down to minus 15. There were two weaknesses, in monetary and in banking. In 2008, all banking indicators were on the rise; asset, third party fund, credits, non-performing loans, and loan to deposit ratio were stable. There was a decline on foreign exchange reserves, yes, but it's a different matter from the banking condition."
Henri opined that Bank Indonesia (BI) wasn't quite right when they tightened the interest rate and the fiscal side simultaneously. This step, he believed, pressured the banking.
Therefore, he thought that the Century Bank bailout was unnecessary. "There wasn't such a big pressure."
Ichsanudin concurs. He said that the systemic reason for the Century Bank bailout was premature. "A systemic effect in that country (US) isn't necessarily so here, it depends on the Indonesian banking condition. The Indonesian banking does have stress resistance."
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