TEMPO.CO, Jakarta - The thinking of those calling for the withdrawal of savings from banks is short-sighted. They have been blinded by the increasingly heated dispute in the run up to the Jakarta gubernatorial election, which is now involving issues of race and religion, and which has spread into the banking sector. This agitation is foolish because it could trigger a financial crisis.
Finance Minister Sri Mulyani was understandably furious about the appearance of a misplaced propaganda spreading on social media. She even asked the police to arrest the troublemakers seeking to justify their political aims by any means. The problem is that the banks are the most important basis of the economic system. If the banks are destabilized, the economy will grind to a halt because the cycle of investment will be halted and the engine of growth will stall.
We still remember how the failure of the banking system in 1997-1998 dragged the economy down for years afterwards. Our economic growth has yet to return to the pre-crisis average of above seven percent.
In other countries, a run on the banking system rapidly leads to economic ruin. For example, in 2008 the sub-prime mortgage scandal in the United States was followed by the large-scale movement of savings to the banks, which led to the national and global economy being stagnant for years.
No one in their right mind would put the national economy at risk for the sake of politics, especially people of lower incomes, who are always the first to suffer in economic crises. As soon as the economy slows down, many lose their jobs. There are mass redundancies, beginning with the poor. Those who have just reached working age would find it difficult to find jobs.
The public should not be easily panicked by underhanded propaganda spread for misplaced political interests. If they see stories on social media complete with pictures of long lines at ATMs, they should check first. It is by no means certain these reports are true. Recently there have been too many lies spread on social media.
There is no need to worry that our banks will run out of money. The financial authority has stated that our banking system is in good shape. As of the end of September, the average CAR (capital adequacy ratio) of domestic banks was 22.30 percent, and non-performing loans were at a safe level of 3.1 percent (gross) and 1.4 percent (net). We also have high levels of foreign exchange reserves, US$115 billion, which is enough to cover imports and to service debts for the next eight months.
In many nations, a banking liquidity crisis has the potential to become a systemic problem if clients with large savings rush to transfer their funds overseas. These people could be Indonesians, or foreigners with funds in domestic banks. But these major depositors are usually rational people who are not easily influenced by foolish propaganda.
However, the possibility of agitation on social media triggering a loss of confidence in the banks must not be arbitrarily dismissed. If that happens, the banks might be unable to cope, which could lead to a negative knock-on effect.
This is why the law enforcement agencies need to listen to Sri Mulani's complaint. If the call from various people to stop this dangerous propaganda proves ineffective, the police should act. Provocateurs must not be allowed to endanger the national economy. (*)
Read the full story in this week's edition of Tempo English Magazine
