Banking Deregulation in Indonesia

In late 1988, the Indonesian government adopted a number of reforms aimed at deregulating the country's banking sector.' Since the reforms, Indonesia's banking system has been undergoing a transformation from an inefficient system dominated by a relatively small number of state-owned banks, to a more volatile system, in which competition among state and privately owned banks is encouraged.' This transformation has been very difficult for the Indonesian banking sector. One example of the difficulties caused by banking deregulation is the number of scandals involving.Indonesian banks and banking officials reported by the international financial press over the past few years. In 1992, for example, Bank Summa, a private institution