(Kontan/Fransiskus Simbolon)

The chiefs of local commercial banks are the highest paid among their peers in four Southeast Asian nations surveyed, according to the central bank.

Top local bankers earned an average of Rp 12 billion (US$1.27 million) a year, including salary, pension and benefits, Mulya Effendi Siregar, Bank Indonesia’s banking research and regulation chief, said in Jakarta on Thursday.

The Indonesian executives were doing much better than top bankers in Malaysia, who earned an annual average of Rp 5.6 billion; Thailand, who earned Rp 2 billion; or the Philippines, who earned Rp 1.1 billion, according to Bank Indonesia.

Mulya said the central bank was worried that the local banks’ high remuneration had contributed to inefficiency in the local banks.

Greed and what has euphemistically been referred to as poor oversight in the banking sector have prompted governments and people throughout the world to consider restrictions on compensation for bankers since the 2008 financial meltdown and ensuing global slowdown.

Bank Indonesia previously said that the efficiency rate or ratio of operating spending to operating revenues of local banks was 80 percent, the worst in ASEAN. The rate of banks in Singapore and Malaysia ranged between 40 and 50 percent, it said.

“Efficiencies must be made to cut costs. If ASEAN can do it, why can’t we?” Mulya told bankers at the National Banking Association Institute’s (Perbanas) “Banking Efficiency Awards” ceremony on Wednesday.

The biggest operational line item for local banks was employee salaries, Mulya said. “If salaries are broken down, we are the No. 3 largest spender on employee salaries — but for directors, we are the top spender.”

The average annual salary for an employee of a local bank was Rp 193 million, compared to Rp 236 million in Malaysia and Rp 300 million in Thailand, the central bank said. However, salaries comprised the largest single part of overall overhead costs in Indonesia at 2.44 percent, compared to 1.81 percent in the Philippines, 1.74 percent in Malaysia and 1.34 percent in Thailand.

Mulya said that the central bank’s efforts to bring down high costs would take the form of warnings and moral suasion.

“We let them know about the conditions in other countries,” Mulya said.

Indonesian banks are the most profitable in Southeast Asia, with average net interest margin of more than 5 percent, indicating higher lending rates charged to customers. Bankers have attributed the high margin to the high risk and high cost of servicing their clients here.

“There’s a shortage in supply for banking executives, while the demand is high given the rapid growth in the country’s banking industry. Not everybody can work in the financial sector,” Bank Mandiri chief economist Destry Damayanti said.

“This is a structural issue. Moral suasion will have only a temporary impact. When banks begin to recruit again, the pressure will re-emerge,” Destry told reporters on Thursday.

Perbanas chairman Sigit Pramono, questioned the central bank’s data, although he conceded that it might be necessary to set up a benchmark for local banker salaries.