Indonesia’s bank governance trend post-1998 crisis

Abstract

Indonesian banks have survived relatively unscathed from the 2008 global financial crisis. There has been no failure of big banks and thus no large government-led bank bail-out. Bank failure has been limited to two medium-sized banks, Bank Century and IFI Bank. IFI Bank was closed in the first quarter of 2009 and Bank Century was taken over by the Deposit Guarantee Agency (LPS) inlate 2008, changed management, altered its name to Bank Mutiara and, finally, was sold to a Japanese investment company, JTrust. There has been some controversy as to the government decision to bail out Bank Century, with the bail out funds ballooning beyond LPS’ capacity, ultimately involving state budgetary funds. But the overall impact of these two bank failures on the sector was negligible, a far cry from the sector’s devastation during the 1997/8 crisis.