A Derivatives Time Bomb
Tuesday, February 24, 2009
The banking industry is busy dealing with the mess over US$4 billion in derivative transaction contracts considered to be speculative. The profits and capital adequacy ratios of banks could plummet. And the rupiah is under pressure.
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DURING the last month, Robi has been much more busy than usual. While concentrating on running his business, this managing director of an oil palm company has had to journey between Medan and Jakarta to settle a lawsuit with two foreign banks in Indonesia’s capital city. His company based in North Sumatra is threatened with losses amounting to billions of rupiah because it carried out derivative transactions through the two banks.
Two weeks ag
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