JAKARTA Feb 22 Indonesia's biggest banks must
write up plans for recovering from potential insolvency, a
measure to ensure that authorities do not have to bail them out,
the chairman of the banking regulator said on Wednesday.
Muliaman Hadad, chairman of the Financial Services
Authority(OJK) told a parliamentary hearing that all
"systemically important banks" - which he did not define - had
to file internal recovery plans to his agency by year-end.
He declined a request to provide a list of what banks are
deemed "systemically important".
For the banks approached to submit recovery plans, their
chief executive, main commissioner and controlling shareholder
must sign the document to show their commitment to it, Hadad
"Shareholders must participate as early as possible in all
problems that may arise," Hadad said, adding that there should
be a recovery task force set up in every big bank.
Indonesia's parliament last year passed a law that lays out
rigid, step-by-step protocols on how authorities should handle a
The law does not allow the use of state budget as a
potential source of support for a troubled bank, although it
gives authority to the president to make a decision on a bank
rescue in times of crisis.
Big banks in Southeast Asia largest economy are already
required to set aside more capital under an OJK regulation for a
"capital surcharge", the size of which depends on how important
the institutions are judged.
Indonesia's biggest banks by assets are Bank Mandiri
, Bank Rakyat Indonesia, Bank Negara
Indonesia, which are state-controlled, and Bank
The banking industry has sound capital levels with average
capital adequacy ratio of 22.7 percent as of December, but some
banks have been facing rising bad debts.
During and after the 1997/98 Asian financial crisis,
Indonesian authorities took over scores of collapsing banks,
many of which were shut and others merged into new or surviving
At the end of 2016, Indonesia had 116 banks, including
sharia ones. In December 1996, there were 239 commercial banks.
(Reporting by Hidayat Setiaji; Writing by Gayatri Suroyo;
Editing by Richard Borsuk)