Billionaire financier George Soros, upon his visit to Jakarta on Wednesday, again stressed the need to improve global bank regulations to avoid another economic crisis.
Soros has repeatedly said that regulators have for years conducted hands-off policies that have allowed banks and other big companies to take risks that could endanger the financial system.
“The whole banking system has become globalized, but it has been operating on a false principle that the system can regulate itself,” he told reporters in Jakarta after meeting Vice President Boediono at the Vice President’s Palace.
“There is a globalization of market, but there is no globalization of regulation.”
Soros said that Indonesia had managed to pass through a difficult period with relatively little damage, comparing the amount of money spent by the country to protect the financial system in comparison to that spent by the US.
The government, through the Deposit Insurance Corporation, spent Rp 6.76 trillion (US$716 million) to bail out Bank Century, which almost collapsed in November 2008. The US provided $700 billion as part of the Treasury’s Troubled Asset Relief Program.
“My visit to the Vice President is really just more to inform myself about the economic and financial conditions in Indonesia because as an ex-central banker I thought that he would be the person who could give me a good overall picture,” he said.
Soros declined to comment further on the Century bailout, which has entered the political arena after lawmakers formed an inquiry committee to scrutinize the bailout decision and key decision makers involved.
He said that regulators could have avoided bailing out the banks if they had managed to regulate banks appropriately.
In Indonesia Soros reviewed the performance of the Tifa Foundation, which he partly finances.
“I think the foundation is doing a very good work and I hope it will actually expand its activities because Indonesia is a vibrant democracy where a foundation devoted to the principle of an open society can in fact make some worthwhile contributions,” he said.