Kamis, 23 April 2009

Condition of Banks in Indonesia

In Indonesia, the mid-1980s a variety of deregulation was issued by the government to stimulate the banking industry. Begins with the release of Policy Package October 27 1988 (PAKTO), which includes areas of financial, monetary and banking. Policies in the fields of banking, among others, include the ease-in ease of opening a bank office, and Financial Institutions Non Bank, permit banks to establish new private sector, among others, with the determination of capital requirements at least paid Rp10 billion, also provides an opportunity to establish Bank Perkreditan Rakyat (BPR ) with a minimum capital 50 million, and simplify the requirements for foreign banks to become bank.
After the release of deregulation, the period of 1988-1996 in the banking business in Indonesia experienced a very rapid development. At the end of 2002, the bank approximately 90.46% market share in the financial sector. Based on data InfoBank Research Bureau, the banking industry over 90.46 percent market share in India's financial, insurance industry, followed by 3.38 percent, 3.01 percent of pension funds, industry, finance 2.32 percent, 0.65 percent securities, and pawnshops 0.20 percent, (Supriyanto, 2003).
The rapid growth that was not able to encourage the creation of a strong banking industry. Financial crisis of Indonesia in the mid-1997 gives a very bad impact on the banking sector. Some of the key indicators in the banking sector in 1998 are on a very bad condition. The performance of the national banking industry at that time worse than the condition of banks in some Asian countries are also experiencing economic crises, such as South Korea, Malaysia, the Philippines and Thailand. Non Performing Loan (NPL) commercial banks reached 50 percent, the level of the banking industry profits are at the point minus 18 percent, and the Capital Adequacy Ratio (CAR) indicates the condition of minus 15 percent, (Hawkins, 1999). The fall of the banking sector is due to indonesia economic crisis forced the government liquidate banks that are not healthy and is not feasible to operate. This resulted in the emergence of the crisis of confidence in the banking industry.

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