Anchor Bank Policy Clouded with Controversies

On Monday (5/18), Indonesia’s Minister of Finance, Sri Mulyani, explained the mechanism for the placement of government funds in anchor bank, which aimed to provide help for smaller banks around Indonesia with liquidity assistance in combatting the increasing risk of bad loans during these uncertain times. In the first step, the anchor banks will receive liquidity support and render the liquidity buffer funds for the ordering banks after conducting a loan restructuring. After that, the ordering bank that applies a credit restructuring policy will submit a proposal to the participating bank related to the restructuring to be carried out by stating the required funds, tenure, liquidity conditions, and securities ownership position. And after reviewing and evaluating the proposal from the executing bank, the participating bank can submit a placement of funds to the Ministry of Finance. According to OJK Board of Commissioners Chairman Wimboh Santoso in a video conference on Monday (5/11), the anchor banks will get liquidity support from a scheme determined by the Ministry of Finance, which will be used as a channel for banks to conduct credit restructuring to maintain liquidity.

Economists' opinions regarding the anchor bank policy seem to oppose the policy issued by the government. Samuel Sekuritas economist, Ahmad Mikail, said that the central bank should be responsible for the support of small banks' liquidity currently affected by the current state. On Saturday (5/16), Mikail stated that “There are many factors, I am still wondering why Bank Indonesia does not provide liquidity assistance to all banks, regarding its responsibility as the nation's central bank. The asset-backed securities should only be repurchased by Bank Indonesia with the term of the repurchase agreement. Hence, there is no need for the government to issue the anchor bank policy.” According to him, the formation of an anchor bank will also increase the risk of non-performing loans. Regarding economists’ opinions, the Minister of Finance, Sri Mulyani emphasized that the placement of government funds in banks is being allocated to help UMKM debtors, not to assist the banking liquidity as it is the authority of Bank Indonesia as the central bank.

The exit of foreign investors from banking shares cannot be separated and is partially derived from the issue of anchor banks. The largest shares released by foreign investors occurred in the banking sector, specifically the shares of PT Bank Central Asia Tbk (BBCA). BCA shares were sold by foreign investors amounting to Rp 1.4 trillion, causing the shares to depreciate 6.75%. Trailing BCA, the shares of PT Bank Rakyat Indonesia Tbk (BBRI) were sold as much as Rp 743 billion in a week causing them to place second on the list. Although a great sum was sold, BRI shares remain in the green zone since its shares have appreciated by 0.4%. Meanwhile, the shares most widely bought by foreigners in the past week is PT Unilever Indonesia (UNVR), whose shares were bought by foreigners totaling up to Rp 145 billion. In contrast to such striking numbers, UNVR shares still fell 2.42% during the week.

Source:

CNN Indonesia

CNBC Indonesia

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