The strengthening of bank-monitoring system and the intensification of banking industry through consolidation would remain a decisive factor to weather crisis amidst the increasingly fiercer global competition, BI Governor Darmin Nasution said at an annual meeting with bankers here Friday night.
"The banking capital will likely be enough to encourage the national economy gradually. But I think the banks will not be strong enough to face crisis," he said.
Both the 1997/1998 monetary crisis and the 2007/2008 financial crisis had sent important signals that fragile banking industry would inflict losses to the state and the central bank and in the end add to the people`s misery, he said.
Bail-out funds might be needed at a time of crisis but experience showed that the funds created new complications in the economic, political and legal sectors, he said.
"We need to have preventive system and strong capital defense. The idea has been discussed intensively by among others replacing bail-out paradigm with bail-in one. This means that banks themselves must have a buffer to deal with risks and upheavals if they are affected by crisis," he said.
The condition had shored up the central bank`s confidence that consolidation from the standpoint of capital and institution must be sped up, he said.
The strong banking capital would also be useful to improve the competitive edge of banks by among others developing information technology and businesses, he said.
The move was needed to face the application of ASEAN Economic Society. Compared to the banking industry in five other ASEAN member countries, the Indonesian banking industry had the lowest capital, he said.(*)
Editor: Aditia Maruli Radja
Copyright © ANTARA 2011
