The Boom, Bust, and Restructuring of Indonesian Banks

35 Pages Posted: 13 Feb 2006  

Mari Pangestu

World Bank

Manggi Habir

Harvard University - Harvard Kennedy School (HKS)

Date Written: April 2002

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.

Keywords: Indonesia, Asian financial crisis, banking reforms

JEL Classification: E55, E65, F3

Suggested Citation

Pangestu, Mari and Habir, Manggi, The Boom, Bust, and Restructuring of Indonesian Banks (April 2002). IMF Working Paper, Vol. , pp. 1-35, 2002. Available at SSRN: https://ssrn.com/abstract=879560

Mari Pangestu (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Manggi Habir

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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