Simatupang, Batara Maju (2007) Bank Recapitalization, Bank Performance and Real Sector Lending: An Analysis of Indonesia’s Economic Recovery from the Crises of 1997-1998. S3 thesis, Indonesia Banking School.
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Simatupang, BM 2017 Bank Recapitalization Bank Performance and Real Sector Lending SSRN-id3635958.pdf Download (3MB) | Preview |
Abstract
This study examines the impact of banks’ recapitalization on the performance of banks and on the effectiveness of real sector lending in Indonesia. The study was based on the recapitalization bonds issued by the Indonesian government as part of the program to restructure and revitalize the Indonesian-banking sector following the economic crisis that occurred in 1997-1998. The genesis of the crisis that knocked Indonesia over was triggered by the contagion-effect. It started with the downfall of the Thai Bath on 2 July of 1997. The crisis in Indonesia could be placed in the third generation model of crisis which focuses on how the banking sector might cause a currency crisis. To stabilize the economy and recover the society’s confidence, the government took actions to stabilize the banking system. The banking recapitalization and restructuring program was formalized under the Indonesian Banking Restructuring Agency. The bank recapitalization was by the injection of government bonds totaling up to IDR430.4 trillion to 36 banks. This was considered as “too big or too important to fail.” This study’s findings (from the empirical analysis of the performance of all recapitalized banks after the capital injection in 1999 and 2000) showed that generally, the performance of banks has significantly improved. Starting from one year, through to five years post-recapitalization, the analysis indicated that the recapitalization had no impact in lowering the provision of non-performing loans, costs-income ratio, and growth of the loan to deposits ratio. This condition made the performance of banks seem to be better, but in fact, from the macro-economic point of view, the ‘good performance’ was an illusion. It caused the recapitalized banks to have as their dominant assets the recapitalization bonds and Bank Indonesia’s Certificates. The effectiveness of banks’ recapitalization to real sector lending was proven to be diverse among the different groups of banks. The behavior of banks with respect to changes in economic fundamentals remained static, even with capital injection, except for the growth of loans in the regional banks. Based on the individual sectors, four sectors showed stagnant or negative growth. On the whole, the fiscal cost of the recapitalization program could not directly help in accelerating the economic recovery from the crisis, contrary to the Claessens, Klingebiel, and Laeven (2001) research findings that a package of specific resolution measures can help accelerate the recovery from such crisis with significant fiscal costs.
| Item Type: | Thesis (S3) |
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| Subjects: | Prodi S2 Magister Manajemen STIE Indonesia Banking School > Prodi S2 Magister Manajemen |
| Divisions: | Library of Congress Subject Areas > Prodi S2 Magister Manajemen Prodi S2 Magister Manajemen |
| Depositing User: | Mr. Batara Maju Simatupang |
| Date Deposited: | 29 Aug 2024 01:12 |
| Last Modified: | 29 Aug 2024 01:12 |
| URI: | http://repository.ibs.ac.id/id/eprint/8253 |
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