TEMPO.CO, Jakarta - Bank Mayapada is preparing for a limited public offering to overcome a liquidity crunch. The oversight of the OJK is open to question.
The move by Dato Sri Tahir to inject further capital into Bank Mayapada Internasional is right. As the owner of Mayapada, Indonesia's seventh-richest person according to Forbes (2019) should take responsibility for the problems that have afflicted the bank, which has total assets of Rp89 trillion. A business solution such as a limited public offering to shareholders or new investors must be prioritized over an injection of state funds.
Mayapada is facing a liquidity crunch. Its liquidity coverage ratio (LCR) in the second quarter of 2020 was 176.34 percent, lower than the position last year of 202.42 percent. The net stable funding ratio (NSFR), which illustrates the ability of the bank’s funding to anticipate future risks, fell to only 120.3 percent in March, down from 160.76 percent in December 2019. Indeed, both of these indicators are still above the threshold required by the Financial Services Authority (OJK), but this state of affairs makes it difficult for the bank to grow.
The slowdown in the economy in the last two years has weakened the banking industry. The Covid-19 pandemic, which struck Indonesia in March, has also reduced the banks' breathing space. Bank deposits in April 2020 were only Rp6.128 quadrillion, a reduction of Rp86 trillion in only one month. Credit flows have dried up, while the level of non-performing loans has risen sharply. Category III public banks, which groups those with the capital of between Rp5 trillion and Rp30 trillion, are among those that have suffered from the effects. MAYA, the Bank Mayapada stock code, is in this category.
However, adding to Mayapada's problems is the revelation that it is one of seven problematic banks. An audit by the Supreme Audit Agency (BPK) of the implementation of OJK oversight between 2017 and 2019 alleged that Mayapada's management has repeatedly advanced loans totaling Rp4.3 trillion to dozens of problem debtors. There were also payments of loans worth Rp23.56 trillion to four groups until May 2019. There are indications that these payments breached the limit for the provision of credit (BMPK) and that they were also affiliated with the owner.
It is here that the OJK oversight system is open to question. The authority knew about these breaches and provided recommendations to Mayapada. However, according to be BPK records, the OJK never applied sanctions or continued investigations when its recommendations were ignored. The same signs were found in the performance of six other banks, including Bank Muamalat Indonesia and Bank Bukopin, which were previously declared to be problematic banks. The OJK is nothing more than a paper tiger.
The BPK report is not the latest investigation. The OJK may well use the excuse that some findings by the state auditor are no longer relevant to the current condition of the bank, which is claimed to be very healthy. But the performance of the bank is a continuous process. Weak oversight and inaction will only lead to more breaches on the part of the bank's management. This is extremely dangerous. The 1998 crisis provided a clear lesson: healthy banks can collapse if their neighbors to the left and right have problems.
The OJK board of commissioners must take action against any of its supervisors found to have broken the rules. The OJK also needs to investigate the payment of loans above the BMPK, particularly to debtors affiliated with the owner. For the last two decades, regulations concerning this have been tightened up and it has been made a criminal offense to prevent a repeat of either the 1998 crisis or the 2008 Bank Century affair. But these efforts will be in vain if the OJK is not able to enforce the rules.
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