VIVAnews - President Director of BNI (Bank National Indonesia), Gatot Suwondo acknowledges that there are funds being transferred from small banks to bigger banks that are deemed safer.
“There has been an increase of deposits in BNI lately, especially in term savings,” says the President Director of BNI to VIVAnews, Wednesday, 19 Nov. “The transfer of funds happened since the rumors of banks having liquidity problems started.”
The rumor itself was started by a 38 year-old Erick Jazier Ardiansyah, who has been taken into custody as of 16 November. In an email dated 13 November 2008, Erick mentioned several banks that were supposedly experiencing problems in liquidity and interbank transactions. The banks mentioned in the e-mail were Panin, Bukopin, Artha Graha, CIC, and Victoria. Erick supposedly did not know the difference between rumor and market news. “His motive is ignorance of the difference between rumor and market news,” said his lawyer, Augustinus Hutajulu, Monday, Nov. 17. “He didn’t actually mean to cause all this (trouble),” he continued. Erick had revised the information that he sent to his customers.
According to Gatot, the rumors have panicked the customers, such that they moved their funds to large banks.
But Gatot does not remember the exact increase in BNI's savings. “I have to check that, but there is an obvious increase on customer savings.” In September 2008, BNI's third party capital amounted to about Rp 143 trillion (approx. US$12 billion).
Gatot does acknowledge that a transfer of funds to large banks is good for BNI because they are one of the banks on the receiving end. But, he also said that for the banking industry and the macro economy as a whole, it shouldn't be taken as a good sign. If a bank is affected, then there will be a systemic risk to the banking industry as a whole.
“In the long run, we'll be affected too,” Gatot said. Take for example Indover. Although they are located abroad, because Indover experienced a financial crisis and was liquidated, BNI as one their creditors also suffered consequences. They have a stake of US$27 million at Indover.
Meanwhile, Sofyan Basir, the President Director of another large bank, BR (Bank Rakyat Indonesia), seems to believe that the increase of funds in large banks is not caused by customers switching from smaller banks.
"The increase does not reflect that there have been transfers of funds from small banks to large banks. It's only rumor," He said to VIVAnews, Wednesday, 19 Nov. But Sofyan admits that nationwide there is quite an increase of people's funds in banks. Compared to August 2008, for the length of September, the money coming in from the customers to the banking industry amounts to Rp 77 trillion (approx. US$6.5 billion).
"The number is quite significant, when compared to the average customers fund in previous months. But it doesn't mean that there has been a transfer of funds from small banks to large banks,” he said.
Regardless, smaller banks are coming up with strategies to keep their customers. “High rates so that customers don't move to the bigger bank,” said President Commissioner of Bumi Arta Bank, Rachmat Mulia Suryahusada to VIVAnews, Jakarta, Thursday, 20 Nov. Bumi Arta Bank is one of the smaller banks, with assets of no more than Rp 2 trillion (approx. US$166.5 million), as of September 2008.
Now, when the liquidity situation of the financial market is difficult and banks do not trust each other, the small banks have to increase their interest rates to try and win over people's money. An interest rate war is inevitable. “Now, the competition for people's money are becoming unfair,” Rachmat said.
Rachmat explained that, chances are, the banks who offer high interest rates will be quite expansive in giving credit. To support the condition their liquidity, they promise customers with interesting rates.
Rachmat also stated that the small banks are still secure. Not to mention the Bank Indonesia is giving full guarantee to the banking industry on their liquidity. “BI can give a short term financing facility for banks that needs them.”
As covered by VIVAnews reporters.
