BI to tigthen banking operations amid scandals<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The central bank, which has been on the receiving end of
\ncriticism following the disclosure of recent banking scams, will
\nimprove its supervisory role within the banking system, a senior
\nofficial has said.<\/p>\n
Anwar Nasution, Bank Indonesia senior deputy governor, said on
\nFriday the central bank was mulling a scheme to strengthen
\ncurrent banking regulations in a bid to help avoid similar fraud
\nin the future.<\/p>\n
He did not provide details as to what regulations needed
\nrevision but said it was necessary to ensure a smooth passage for
\ncurrent bank restructuring efforts.<\/p>\n
\"We shall work tirelessly to see that such incidents (fraud)
\ncan be prevented in the future,\" Anwar told a business conference
\nin Bali, as reported by Dow Jones.<\/p>\n
The statement was the first response from the central bank
\namid mounting public pressure to strengthen the supervisory
\nmechanism on the banking system, which has proved itself to be
\nweak and helpless in preventing fraudulent conduct within the
\nindustry, as evident from the Bank Negara Indonesia (BNI) and
\nBank Rakyat Indonesia (BRI) fraud cases.<\/p>\n
Branch offices in the two banks, both state owned and publicly
\nlisted, are alleged to have abused their respective authority in
\ntheir role in the banking scandal.<\/p>\n
In the BNI case, a branch in Jakarta granted a loan proposal
\nfrom a group of self-proclaimed exporters, amounting to Rp 1.7
\ntrillion, to finance export transactions backed by fictitious
\nletters of credit.<\/p>\n
As for BRI, the country's fourth-largest lender in terms of
\nassets, three of its branches also improperly channeled some Rp
\n300 billion in loans to businesspeople backed by fictitious cash
\ncollateral deposits.<\/p>\n
As both scams occurred in the banks' branches, calls
\nintensified to revise and strengthen their internal control
\nprocedures.<\/p>\n
Banking law expert Pradjoto also suggested a revision in the
\nbanking supervisory system.<\/p>\n
He told The Jakarta Post, \"What has happened in the two banks
\nreflects the need for a regulation that requires a branch manager
\nto secure approval from the bank's board of directors before
\ngranting credit, and for other banking transactions.\"<\/p>\n
Anwar earlier admitted that the central bank could only carry
\nout its supervisory role effectively on bank headquarters, but
\nnot their branches, citing a lack of resources. He said it would
\nbe virtually impossible to closely monitor thousands of branches
\nof some 141 local banks operating across the country.<\/p>\n
Bank Indonesia Governor Burhanuddin Abdullah has said, though,
\nthat it planned massive staff recruitment to overcome such a
\nresource problem.<\/p>\n
Meanwhile, the Attorney General's Office declared on Friday
\nYudi Kartolo and Hartono, owners of PT Delta Makmur Experindo, as
\nsuspects for their alleged involvement in the BRI loan scam.<\/p>\n
\"We have declared them suspects today. Accordingly, we have
\nalso slapped a travel ban on both so they can't flee abroad,\"
\nsaid office spokesman Kemas Yahya Rahman.<\/p>\n
He also said that the office had not yet been able to arrest
\nthem, although efforts to locate and arrest the two suspects were
\nunder way.<\/p>\n
However, the office has managed to rescue Rp 100 billion in
\nstate funds in the case. \"We have been able to save another Rp 10
\nbillion in the case. In total, we have Rp 100 billion in our
\nhands,\" said Kemas.<\/p>\n
In a related development, director of the banking supervision
\nunit at the central bank Aris Anwari said Bank Indonesia had
\nissued a regulation requiring large local banks to equip
\nthemselves with a director of its risk management unit.<\/p>\n
Aris said the move should form part of efforts to make banks
\nmore prudent in their business operations. As for smaller banks,
\nhe said, such authority would rest with the compliance director.<\/p>",
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