Bank Bali imbroglio<\/p>\n
The decision by Indonesian Bank Restructuring Agency (IBRA)
\nchairman Glenn Yusuf last week to review the agency's management
\nand investment agreements with Standard Chartered Bank (SCB) of
\nBritain for Bank Bali, though rather late, is imperative to
\nresolving the imbroglio between Bank Bali local staff and SCB
\nmanagement team.<\/p>\n
The protracted hostility of local staff toward SCB may dampen
\nthe future entry of foreign bankers who are needed to introduce
\nan international culture into domestic banks. The dispute may
\nalso discourage foreign investors, who are expected to play a key
\nrole in helping the country's economic recovery.<\/p>\n
That many Bank Bali staff members have staged nearly daily
\nprotests against the SCB-led management and initiated a campaign
\nof noncooperation with the management since October, braving the
\nrisk of dismissal at a time when thousands of bank employees have
\nbeen made redundant amid the banking crisis shows that the SCB
\nmanagement team has failed to execute its basic function --
\nmanaging people.<\/p>\n
The local staff's complaints about the alleged hiring by SCB
\nof an excessive number of expatriates and the hefty expenses
\nsubsequently incurred by the foreign staff should be verified
\nagainst Bank Bali's financial performance since the bank's
\nmanagement was taken over by the British bank in late July.
\nInvestigations are also warranted to ascertain as to whether
\nthere is any evidence supporting SCB's suspicions that former
\nowners and other shareholders of Bank Bali were engaged in
\nunderhanded maneuverings to engineer the local staff protests to
\nforce SCB to drop its option to buy 20 percent of the bank.<\/p>\n
True, Bank Bali's problems have been exacerbated by the
\ndisclosure, only two days after its management was taken over by
\nSCB, of its questionable transfer of Rp 546 billion in commission
\nto PT Era Giat Prima under what is now notoriously known as the
\npolitically charged Bank Bali scandal.<\/p>\n
But the local staff's allegations that Bank Bali's financial
\ncondition is now much worse than it was in late July and that the
\nremuneration and expenses of the 60-member management team
\nbrought in by SCB almost equals the combined salary of the bank's
\n6,300 local staff are quite damaging.<\/p>\n
In fact, perusing the IBRA-SCB management contract for Bank
\nBali, one should be surprised by the virtual blank check granted
\nto the UK bank in managing Bank Bali. The three-year contract
\ndoes not stipulate any parameter to assess SCB performance but
\ngrants SCB unlimited authority to appoint the majority of
\ndirectors and supervisors and all senior nonboard management
\nwithout any specified limitations on their remuneration and
\nexpenses.<\/p>\n
Most surprising is the stipulation that IBRA and Bank Bali are
\nobliged to indemnify SCB against any and all losses, costs,
\nexpenses, claims and other liabilities incurred in connection
\nwith its operational management of Bank Bali. In case of
\ntermination of the management contract by IBRA prior to the
\nexpiry of its three-year term, SCB is entitled to an early
\ntermination fee of US$25 million. Even if the agreement is
\nterminated by SCB before the expiry date, SCB is still entitled
\nto $2.5 million in compensation.<\/p>\n
Since SCB does not face any risks and will continue to get its
\nmanagement fee irrespective of whether Bank Bali loses money or
\nnot, there seems no incentive at all for SCB to control its
\nexpenses in the provision of management services to Bank Bali.
\nSince SCB has no stake in Bank Bali and is instead competing with
\nit for corporate and private banking customers, it appears that
\nthe UK bank faces a conflict of interest, especially because it
\ncan at anytime waiver its option to buy 20 percent of Bank Bali.<\/p>\n
The restlessness of Bank Bali local staff, the disadvantages
\nof the contract for IBRA and SCB's apparent conflict of interest
\nin its management of Bank Bali are all imperative reasons for a
\nreview of the management contract.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bank-bali-imbroglio-1447893297",
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"sponsor": "Okusi Associates",
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