BANKS SHOWING BETTER PERFORMANCE

By Andi Abdussalam

Jakarta, July 6 (ANTARA) - The country's banking system remained stable and performed better in the first half of this year as shown by credit growth, capital adequacy ratio (CAR)  and stable non-performing loan ratio (NPL).          Until the end of June, 2010, banks were able to increase their intermediary role in providing credits which increased by 18.6 percent compared with that in the same period a year earlier.          "The banking industry is showing stable development as reflected by the high CAR and the gross NPL ratio which has remained below five percent," Darmin Nasution, acting governor of Bank Indonesia (BI/ the central bank) on Monday.           He said the banks' intermediary role was also improving as reflected by credit growth which until the end of June 2010 increased 18.6 percent to Rp1,531.5 trillion compared with the previous year's.          Bank Indonesia, he said, would continue monitoring conditions in the banking sector and promoting efficiency to further improve the banks' intermediary role.          According to Perry Warjiyo, director of economic research and monetary policy (DKM) of Bank Indonesia,  bank credits during June 2010 reached a total of Rp1,531.5 trillion which represented an increase of 18.68 percent or Rp241 trillion from the figure in the same month last year.          "For the period of June 9 until July 9, 2010, loans grew by 18.68 percent or an increase of Rp241 trillion to Rp1,531.5 trillion," said.          Perry said the increase in credits occurred because more and more private banks had begun lending following the example of state and regional government banks.          He said loans extended in the period January-June 2010 (year-on-year) had increased by Rp101.3 trillion or grew 7.1 percent compared to the  end of December 2009 when the figure was Rp1,437.930 trillion.          Indonesia's economic growth, he said, had improved since the global economic crisis ended. "During the third quarter of 2009 our economy was driven by consumption, after which it began to switch to exports that caused an increase in imports and investment needs, so that credit grew," he said.          Therefore, Perry said, he was optimistic that by the end of the year credit growth would exceed the maximum target set at 20 percent. "I am sure, credit growth will be more than 20 percent late this year because our economy has become stronger," he said.          With the encouraging growth, Darmin Nasution was earlier reported to have said that the central bank would revise its credit growth target of 17-20 percent  upward to  more than 20 percent this year.          Until the first quarter of 2010 the central bank noted that credits had grown rapidly to reach 17.6 percent. "We will revise it upward because credit grew rapidly to 17 percent or more than in the first quarter of 2010," said Nasution.          On the country's economy, Darmin said the central bank predicted it would grow by up to six percent following the improved developments in the global and domestic economy.          The country's economy tended to grow towards the upper level of the range between 5.5 and 6.0 percent, he said.          "Exports and investments will continue to rise to further strengthen consumption to support higher economic growth in 2010 and 2011," he said predicting that the country's economy would grow between 6.0 and 6.5 percent in 2011.          He said the high surplus recorded in the current account deficit and financial as well as capital transactions was in line with the improving global economy and a hike in the world's commodity prices as well as increasing foreign capital inflows following an improvement in the outlook of the country's credit rating and international perception on the country.          In the face of this favorable condition, BI was urged to continue playing its supervisory role over banks' performance, particularly with regard to the government's plan to hand the austerity to oversee the banking industry to a Financial Service Authority (OJK).          Economists said that BI should continue to be the sole authority to oversee the banking industry as it has already been performing this function quite well. Handing the authority to oversee the banking industry to the OJK the government plans to form by the end of 2010 will only create new problems, they said.          Economist Aviliani and Sigit Pramono expressed the view at a seminar of the Association of Indonesian Economists (ISEI). Aviliani said the authority to supervise banks must not be taken from Bank Indonesia because if it is,  the central bank will have difficulty coordinating and synchronizing the bank industry's data with BI monetary policy.          "So far BI has already had difficulties collecting bank data. So the situation will only worsen if BI's control power is spinned off. This power is very important for BI with regard to bank monitoring and monetary policy making," she said.          She referred as an example to the new policy package issued by BI on June 16 which is based upon statistics of funds in banks.          Sigit Pramono who is general chairman of the National Banking Association (Perbanas) meanwhile said that based on a survey done by Perbanas 95 percent of bankers view that bank supervision by BI in the last five years have gone well despite problems in several banks.          The former president director of state-owned bank BNI said the bankers gave the appreciation because BI had implemented four key principles for bank supervision namely objectivity, transparency, independence and preparedness of human resources and clear authority.          "There is no guarantee that by spinning off  the supervisory power from BI situation would be better," he said. ***2*** (T.A014/A/H-NG/a014)06-07-2010 18:00:5