Dominoes: Indonesian banks eye survival, not bug : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Y2K COLUMN - Indonesian banks eye survival, not bug 02:00 a.m. May 26, 1999 Eastern By Soraya Permatasari

JAKARTA, May 26 (Reuters) - Indonesia's debt-laden banks have paid scant attention to the countdown to the year 2000 as they devote all their energy and resources to simply surviving Indonesia's economic meltdown.

With some banks trying to raise more than a billion dollars through rights issues just to stay afloat, the costly task of preparing their computers against the millennium bug biting as January 1, 2000 dawns is beyond their reach.

``Y2K is definitely not a priority for many banks,'' says ING Barings banking analyst Limi Halim.

``First of all, they have to struggle just to survive.''

The Y2K problem stems from the common practice of using only two digits to show the year in dates -- 99 for 1999, for example.

With 2000, some computers and microchips used in machines may read 00 as 1900, causing them to produce flawed data or crash.


Analysts doubt that even Indonesia's healthiest banks, those with a capital adequacy ratio already above four percent, can afford to upgrade their computer systems.

``These banks are mostly small, and they just don't have enough money for the project,'' said one analyst.

``They also have a liquidity problem, so controlling shareholders need to keep injecting money to maintain liquidity and to maintain the capital adequacy ratio,'' said ABN Amro Securities banking analyst Kim Kwie.

According to an official at the Jakarta Stock Exchange, only 13 of the 28 listed banks have taken steps to deal with the Y2K problem. Only two have declared themselves Y2K compliant.

Bank Panin said it has almost completed the process, while Bank Bali, Bank BII and Bank BNI say their systems are Y2K ready.

Consultants say a lack of awareness of the problem has added to the delays in addressing Y2K.

``I can say that the awareness here is quite low -- and by the time they realised it, there wasn't much time left,'' a consultant in charge of a Y2K project told Reuters.

Indonesia's 170 banks have submitted initial reports on their Y2K programmes to the central bank, Bank Indonesia, and were expected to file evaluation reports by the end of last month.


Central Bank governor Syahril Sabirin said banks which failed to become Y2K compliant would be punished, but the penalty had yet to be determined.

Sabirin said Bank Indonesia completed its own Y2K programme by the end of 1998: ``So we have one whole year to do the test on the system.''

Best placed are the major banks, some of which are already testing their new systems.

``I think the big banks will have no problem with complying with Y2K -- but how much they have accomplished, nobody can be absolutely sure,'' said ABN Amro's Kwie.

ING Barings' Halim said trials had uncovered problems at some banks that would need solving before they could be confident of a safe transition to the year 2000.

Most of the big banks have set themselves a June deadline for becoming millennium compliant.

One of the biggest retail banks, Bank BCA -- formerly owned by the prominent Salim group -- was one of the first to declare itself Y2K ready. Unibank and Bank NISP also say their systems are sound.

Some of the major banks have spent millions of dollars battling the millennium bug.

``In our company, it has cost us more than $6 million,'' said Aryanto Ruslim, head of Panin's IT department.

Bank Niaga has spent about $18 million and BNI about $10 million.

But these amounts pale next to allocations by other companies. State-owned domestic telecoms giant Telkom, for example, has a $50 million loan from the World Bank for its Y2K project.


Overall, the Indonesian banking sector's battle plan for the Y2K bug does not fill the experts with confidence.

Adji Gunawan, a Y2K consultant at Andersen Consulting, says the country may still be ironing out Y2K bugs until 2003.

Some bankers, too, are less than optimistic.

``I don't think there is a single firm in Indonesia that will be fully compliant,'' said one.

-- Arlin H. Adams (, May 27, 1999


I notice with some interest Mr. Adams that you seem to choose only bad news stories to post on this forum. Are you any different than Norm in this regard? (who only posts good news, and takes considerable heat for it)

-- just (asking@question.s), May 27, 1999.

Unlike Norm, Arlin is a responsive, clear thinking contributor to this forum.

-- texan (, May 27, 1999.

Arlin has contributed a substantial amount of his own thoughts and ideas to this forum for a long time. To compare Arlin to Norm is unjustified. If you were here or spent time searching the archives last year, you would know what I mean. It's all been said before and sometimes in eloquent and piercing ways.

-- PNG (, May 27, 1999.

er, thanks, guys, I'd also note that unlike Norm, I'm an adult who posts using his real name and email address.


-- Arlin H. Adams (, May 27, 1999.

I see. So you posting only bad news to this forum IS different from Norm only posting good news. I'm new here and trying to adjust myself to this rather odd logic.


-- just (asking@question.s), May 28, 1999.

This story about Indonesia was posted yesterday. See:

Milne: The Collapse of Indonesia

-- lurker (, May 28, 1999.

Moderation questions? read the FAQ