Aditya Suharmoko, Jakarta – The banking sector remains solid despite a liquidity squeeze caused by the global financial crisis, the central bank says, dismissing rumors of a deposit run on some banks.
Today several people have been arrested for allegedly spreading such rumors, mostly through short message services (SMS), as banks joined forces to help authorities find the people responsible.
"We gathered banks to discuss the rumors. We tried to help find out who was spreading them. Thank God, they have been arrested now and will face the due process of law," Bank Indonesia deputy governor Siti Fadjrijah said Friday evening, adding that what these people have done posed a systemic threat to the banking sector.
Earlier in the day, the central bank warned the public to remain calm in anticipating news on the banking sector. "Bank Indonesia (BI) is concerned on the rumors of a liquidity shortage in and a deposit run on some banks, which can disrupt investors' confidence to our banks. The rumors are not true and are groundless," BI governor Boediono told a press conference.
"The reform and restructuring of the national banking (sector) in the past 10 years has made our banking (sector) one of the most solid ones in Asia," he said, referring to the period following the 1997-1998 financial and economic crisis. "We expect the public to remain calm in anticipating news on the condition of national banks."
The average banks' capital adequacy ratio in October stood at 16 percent, far higher than the central bank's requirement of 8 percent, while the rate of non-performing loans was on average about 3.9 percent, below the designated maximum tolerance of 5 percent.
On Thursday, Bank Century, a lender with Rp 15.23 trillion (US$1.31 billion) in assets, was late to settle an obligation of Rp 5 billion to the central bank's clearing system due to a "technical problem", BI said. Rumors circulated that the bank was short of liquidity, sparking concerns among depositors.
Century CEO Hermanus Muslim said the bank had at first failed to settle its obligation as "a branch in Sumatra was late in channeling its cash". BI deputy governor Budi Rochadi confirmed that Century settled its obligation after the clearing house was closed at 8 a.m. Thursday.
"At 8 a.m. all banks are expected to provide pre-fund cash. If we wait for a bank (to do this), all clearings will be delayed," Budi said.
According to BI, a bank's pre-fund cash amount is determined based on the bank's highest claims on any one day during the past 12 months, which must be submitted to the clearing house to prevent the bank from having a negative balance. Banks need to provide funds to the clearing house on a daily basis to match their debts and credits.
Century Friday managed to submit its pre-fund cash to the clearing house and all its offices and branches in all regions were operating as usual, Boediono said.
He said BI had provided a short-term financing facility (FPJP) to help banks short of liquidity to be able to continue their operations.
Hermanus said Century would receive an FPJP from the central bank to anticipate a potential rush of withdrawals as the bank might not have enough cash if depositors panicked and decided to pull their money out. (dis)