The Boom, Bust and Restructuring of Indonesian Banks

Pangestu, Mari; Habir, Manggi

doi:10.5089/9781451848809.001

Cited by 21 publications

(16 citation statements)

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“…Indonesia, egged on by the free‐market zeitgeist of the time, had embarked on vigorous deregulation, especially after 1988. Seventy‐four banks had become over 200 within a few years after 1988, with many of them not much more than the financial arm of related commercial conglomerates (Pangestu and Habir ). Everyone knew of Indonesia's banking fragility.…”

Section: The Lessons From the Crisismentioning

confidence: 99%

The Asian crisis: what did we learn and when did we learn it?

Grenville

2017

Asian-Pac Economic Lit

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This paper steps back from the detail of the Asian crisis, to ask whether the 1997 crisis advanced our broad understanding of the age-old problem of economic crises. Some immediate lessons were learned from the failures of the crisis-response in Indonesia, which was the worstaffected economy. It is notable, however, how little changed to address the ongoing systemic weaknesses. Three areas of unresolved vulnerability can be identified. First, the sudden stops and reversals of international capital flows. Second, the intrinsic fragility of a financial system that borrows short and lends long. Third, unanchored exchange rates, where the market's price-discovery can take the rate to levels far from equilibrium, for sustained periods. For more than a decade after the Asian crisis, international capital flows continued to be seen as unambiguously beneficial, with any attempts at capital flow management rejected. At a global level, it was not until the 2008 financial crisis that widespread financial fragility was addressed through tighter regulation and higher capital requirements. On exchange rates, misleading advocacy of corner solutions-either pure floating exchange rates or immutable fixed rates-continued in the face of the real-world experience that sometimes intervention is needed to maintain an exchange rate close to equilibrium. ). A version of this paper is published in the Lowy Analysis series. 30

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Section: The Lessons From the Crisismentioning

confidence: 99%

The Asian crisis: what did we learn and when did we learn it?

Grenville

2017

Asian-Pac Economic Lit

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“…Of private banks with a CAR of −25% to less than 4%, those that had more than 80,000 deposit accounts were recapitalized after being temporarily placed under state control (in other words, nationalized). 14 For the course of the five rounds of bank reconstruction, see Enoch (2000), Enoch et al (2001), Pangestu and Habir (2002), Takeda (2000), Komatsu (2003), and Ary Suta and Musa (2003). the Salim Group was purchased by a consortium of investors composed of an American investment firm and Djarum Group.…”

Section: A the Collapse Of Business-group-affiliated Banksmentioning

confidence: 99%

Bank Restructuring and Financial Institution Reform in Indonesia

Sato¹

2005

The Developing Economies

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The banking sector underwent drastic reform in post‐crisis. Indonesia. Bank restructuring, driven by IMF conditionalities, resulted in the exit of insolvent banks and ownership changes of major private banks. Through recapitalization and sales of government‐held shares, foreign‐owned banks emerged as leading actors in the place of business‐group‐affiliated banks. As part of the restructuring process, an exit rule was created. The central bank, which up to that time had been given only partial authority under the jurisdiction of the Minister of Finance, now gained a full range of authority over banks. The central bank's supervision system on banks, risk management systems at individual banks, and their efforts to build risk management capacities, began to function. This is totally different from the old financial institution under the Soeharto regime, where banks had no incentive to control risks, as the regime tacitly ensured their survival.

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“…Prepared by Steven Seelig, Michael Taylor, and Cem Karacadag.2 SeeCole and Slade (1998),Enoch et al (2001), andPangestu and Habir (2002) for comprehensive overviews of Indonesia's banking crisis and initial stabilization and reform efforts 3. The number of private banks number grew from 101 to 182 between 1988 and 1991(Pangestu and Habir, 2002), and peaked at 240 in 1994(Enoch et al, 2001). The share of foreign currency and real estate loans more than doubled to 20 percent and 21 percent, respectively, by mid-1997.…”

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confidence: 99%

Indonesia: Selected Issues

Fund¹

2016

IMF Staff Country Reports

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The Boom, Bust and Restructuring of Indonesian Banks

Cited by 21 publications

References 1 publication

The Asian crisis: what did we learn and when did we learn it?

The Asian crisis: what did we learn and when did we learn it?

Bank Restructuring and Financial Institution Reform in Indonesia

Indonesia: Selected Issues

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