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The Boom, Bust and Restructuring of Indonesian Banks

Author

Listed:
  • Mari Pangestu
  • Manggi Habir

Abstract

This paper studies why currency and monetary shock hit Indonesia's economy and banking sector so severely and the measures that were taken to deal with the banking crisis, the lessons learned, and challenges faced in restructuring and strengthening the banking system. The vulnerable state of the banking sector, in combination with exchange rate and interest rate shocks, led to a systemic banking crisis. The priorities for bank restructuring are to complete the separation of nonviable from viable banks, recoup losses, implement new rules and regulations, and develop an incentive-based system for the consolidation of banks.

Suggested Citation

  • Mari Pangestu & Manggi Habir, 2002. "The Boom, Bust and Restructuring of Indonesian Banks," IMF Working Papers 02/66, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:02/66
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=15704
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    References listed on IDEAS

    as
    1. Leslie E Teo & Charles Enoch & Carl-Johan Lindgren & Tomás J. T. Baliño & Anne Marie Gulde & Marc G Quintyn, 2000. "Financial Sector Crisis and Restructuring; Lessons from Asia: Lessons from Asia," IMF Occasional Papers 188, International Monetary Fund.
    2. Charles Enoch, 2000. "Interventions in Banks During Banking Crises; The Experience of Indonesia," IMF Policy Discussion Papers 00/2, International Monetary Fund.
    3. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
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    Citations

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    Cited by:

    1. Aykut Kibritcioglu, 2002. "Monitoring Banking Sector Fragility," Macroeconomics 0206004, EconWPA, revised 17 Mar 2006.
    2. Vicente Cuñat, 2009. "Finance for Development: Latin America in a Comparative Perspective. By BARBARA STALLINGS with ROGERIO STUDART," Economica, London School of Economics and Political Science, vol. 76(301), pages 216-217, February.
    3. Agusman, Agusman & Cullen, Grant S. & Gasbarro, Dominic & Monroe, Gary S. & Zumwalt, J. Kenton, 2014. "Government intervention, bank ownership and risk-taking during the Indonesian financial crisis," Pacific-Basin Finance Journal, Elsevier, vol. 30(C), pages 114-131.
    4. Siregar, Reza Y., 2002. "Interest Rate Policy And Its Implication On The Banking Restructuring Programs In Indonesia During The 1997-Financial Crisis: An Empirical Investigation," EIJS Working Paper Series 154, Stockholm School of Economics, The European Institute of Japanese Studies.
    5. Parinduri, Rasyad A. & Riyanto, Yohanes E., 2012. "The Impact of the Strategic Sale of Restructured Banks: Evidence from Indonesia," World Development, Elsevier, vol. 40(3), pages 446-457.
    6. Rasyad Parinduri & Yohanes Riyanto, 2011. "Do banks respond to capital requirements? Evidence from Indonesia," Applied Financial Economics, Taylor & Francis Journals, vol. 21(9), pages 651-663.
    7. Ross Mcleod, 2006. "Indonesia's new deposit guarantee law," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 42(1), pages 59-78.
    8. Gary Gorton & Lixin Huang, 2004. "Liquidity, Efficiency, and Bank Bailouts," American Economic Review, American Economic Association, vol. 94(3), pages 455-483, June.
    9. Rasyad A. Parinduri & Yohanes E. Riyanto, 2014. "Bank Ownership and Efficiency in the Aftermath of Financial Crises: Evidence from Indonesia," Review of Development Economics, Wiley Blackwell, vol. 18(1), pages 93-106, February.
    10. Stephen Grenville, 2004. "The IMF and the Indonesian crisis," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(1), pages 77-94.
    11. Iskandar Simorangkir, 2012. "Study on early Warning Indicators of Bank Runs: Markov-Switching Approach," EcoMod2012 4147, EcoMod.
    12. Obben, James & Nugroho, Agus Eko, 2003. "Determinants Of The Funding Volatility Of Indonesian Banks: A Dynamic Model," Discussion Papers 23700, Massey University, Department of Applied and International Economics.
    13. Donsyah Yudistira, 2002. "The Impact of Bank Capital Requirements in Indonesia," Finance 0212002, EconWPA, revised 18 May 2003.
    14. repec:bla:apacel:v:31:y:2017:i:2:p:30-44 is not listed on IDEAS
    15. Glenn Hoggarth & Jack Reidhill & Peter Sinclair, 2004. "On the resolution of banking crises: theory and evidence," Bank of England working papers 229, Bank of England.
    16. Rahmatina A. Kasri, 2011. "Explaining the Twin Crises in Indonesia," Working Papers in Economics and Business 201102, Faculty of Economics and Business, University of Indonesia, revised May 2011.
    17. Margono, Heru & Sharma, Subhash C. & Melvin II, Paul D., 2010. "Cost efficiency, economies of scale, technological progress and productivity in Indonesian banks," Journal of Asian Economics, Elsevier, vol. 21(1), pages 53-65, February.

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