Toothless Oversight

Translator

Tempo.co

Editor

Laila Afifa

18 July 2020 18:00 WIB

TEMPO.CO, JakartaBank 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.

Read the Complete Story in Tempo English Magazine



Global Recession Likely to Happen in 2023, OJK Warns

8 jam lalu

Global Recession Likely to Happen in 2023, OJK Warns

Mahendra Siregar, chief of the Financial Services Authority (OJK), has predicted that a global economic recession is almost certain to happen in 2023


Covid-19 Pandemic Could Soon End, Says President Jokowi

19 jam lalu

Covid-19 Pandemic Could Soon End, Says President Jokowi

Jokowi hinted at the possibility that the government will announce the end of the Covid-19 pandemic.


Indonesia Comic Con 2022, First One to be Held After Two Years into the Pandemic

2 hari lalu

Indonesia Comic Con 2022, First One to be Held After Two Years into the Pandemic

After two long years of no face-to-face event, Panorama Media held again the biggest pop culture event in the country, Indonesia Comic Con 2022.


Sugar Tax Could Boost Both Health and Economy

2 hari lalu

Sugar Tax Could Boost Both Health and Economy

Taxes on sugary drinks can often improve a nation's economy, rather than having the devastating impact industry has claimed.


Taiwan to End COVID-19 Quarantine for Arrivals, Welcome Back Tourists

4 hari lalu

Taiwan to End COVID-19 Quarantine for Arrivals, Welcome Back Tourists

Taiwan says arrivals will still need to monitor their health for a seven-day period and take rapid tests, but tourists will be allowed to return.


Luhut Pandjaitan Claims Others See Indonesia as 'Mini Superpower' in Economy

5 hari lalu

Luhut Pandjaitan Claims Others See Indonesia as 'Mini Superpower' in Economy

The Minister claims other parts of the world had commended Indonesia's economy and given the country the nickname of a mini superpower.


Luhut: Indonesia Among Countries With Strong Economy

6 hari lalu

Luhut: Indonesia Among Countries With Strong Economy

Coordinating Minister Luhut Pandjaitan claims that Indonesia has become one of the countries that have a strong economy in the world.


Preparing for the 'Perfect Storm' Remains Crucial, Says Luhut Pandjaitan

7 hari lalu

Preparing for the 'Perfect Storm' Remains Crucial, Says Luhut Pandjaitan

Minister Luhut Pandjaitan urged people to remain unified to reduce the effects of the global crisis.


Do it Independently or Die; Self-help Movement of Transgender Women Community

7 hari lalu

Do it Independently or Die; Self-help Movement of Transgender Women Community

The transgender women community moves independently as they are often excluded from government programs.


Tax Revenues Reach Rp1,171tn; Sri Mulyani: Exceeds Pre Pandemic Level

7 hari lalu

Tax Revenues Reach Rp1,171tn; Sri Mulyani: Exceeds Pre Pandemic Level

Finance Minister Sri Mulyani Indrawati revealed that the country's tax revenues until the end of August 2022 had exceeded the pre-pandemic level.