Cabinet must stamp out corruption in ailing banks<\/p>\n
The Indonesian Bank Restructuring Agency (IBRA) has reported
\nincreases in liquidity support to ailing banks. Economist Kwik
\nKian Gie finds disturbing facts about the rife corruption in the
\nbanks.<\/p>\n
JAKARTA (JP): Absence of media reports on the manipulation of
\nfinancial data of commercial banks under the supervision of the
\nIndonesian Bank Restructuring Agency (IBRA) shows poor concern
\nabout corruption. IBRA said on May 15 that 54 commercial banks
\nunder its supervision had accrued Rp 109.4 trillion ($7.8
\nbillion) in financial support from Bank Indonesia.<\/p>\n
The amount of support for the banks had by then increased to
\nRp 130 trillion; it may well have increased further by now.<\/p>\n
According to IBRA report, six banks -- Bank Dagang Negara
\nIndonesia (BDNI), Bank Danamon, Bank Umum Nasional, Bank Tiara,
\nBank Modern and Bank PDFCI -- had lent Rp 76.7 trillion to their
\nborrowers. Of this amount, Rp 47.3 trillion, or 67 percent, was
\nchanneled to their own affiliated companies.<\/p>\n
The credit provided by BDNI to its affiliates reached 90.7
\npercent (Rp 24.4 trillion) of its Rp 26.9 trillion borrowing from
\nBank Indonesia, Bank Umum Nasional 78.4 percent (Rp 8.7 trillion)
\nof Rp 11.1 trillion, Bank Modern 63.2 percent (Rp 1.2 trillion)
\nof Rp 1.9 trillion, Bank Danamon 43.8 percent (Rp 12.9 trillion)
\nof Rp 29.5 trillion and Bank Tiara 2 percent (Rp 100 billion) of
\nRp 3.4 trillion. Bank PDFCI gave no loans to its own affiliates.<\/p>\n
In plain and simple terms, 87 percent of the Rp 66.9 trillion
\nlent by Bank Indonesia to the banks was channeled back to their
\naffiliates.<\/p>\n
This is a grievous, arrogant and utterly ludicrous violation
\nof the regulation on legal lending limits.<\/p>\n
The authorities are still trying to cover up facts. Instead of
\nhiring Indonesian consultants, they prefer to hire foreign
\nconsultants, who will keep silent as long as they are well paid
\nand well served, to audit the violating banks.<\/p>\n
Furthermore, the auditors learned that the banks had marked up
\ntheir assets substantially. They discovered that the real value
\nof BDNI's total assets was only 17.2 percent (Rp 5.8 trillion) of
\nthe Rp 33.6 trillion it had reported, Bank PDFCI 25.5 percent (Rp
\n1.1 trillion) of Rp 4.4 trillion, Bank Tiara 46.4 percent (Rp 2
\ntrillion) of Rp 4.3 trillion, Bank Danamon 51.2 percent (Rp 13.1
\ntrillion) of Rp 25.5 trillion, Bank Modern 57.1 percent (Rp 1.8
\ntrillion) of Rp 3.1 trillion and Bank Umum Nasional 72.4 percent
\n(Rp 11.3 trillion) of Rp 15.5 trillion.<\/p>\n
If the Rp 51.4 trillion difference between the amount of
\nassets reported by the banks and that calculated by the auditors
\nwere deposited by their personnel in banks, it would produce
\ntotal after-tax monthly interest of about Rp 1.82 trillion. It
\ndwarfs the potential income of Rp 15 trillion that state-owned
\ncompanies might generate through share sales to private
\ninvestors.<\/p>\n
The IBRA report said the total assets of the banks whose
\noperations were now suspended reached only 20 percent of their
\ntotal financial obligations. Banks whose management was taken
\nover by the IBRA had lent their funds to their shareholders and
\nexecutives.<\/p>\n
The report also said, "...BDNI and Bank Danamon had faced
\nliquidity problems even before the start of the monetary crisis
\nand they obtained large amounts of loans from Bank Indonesia
\nthrough special money market securities. The loans reached Rp 9.8
\ntrillion for BDNI and Rp 11.3 trillion for Bank Danamon."<\/p>\n
Between May and October 1997, BDNI provided new loans worth
\n$600 million to its affiliates. Its shareholders should thus take
\nresponsibility for the repayment of the loans, the report said.<\/p>\n
The possibility of litigating the case needed to be seriously
\nconsidered because the administration of the loans to affiliated
\ncompanies was very weak, it said.<\/p>\n
The last sentence on possible litigation indicates that the
\nauditors were irritated by their own findings, but they added
\nthat IBRA still had no strong legal basis to take legal
\nproceedings against banks under its supervision because it needed
\nauthorization from Bank Indonesia for litigation. Documents for
\ntheir litigation are still being processed.<\/p>\n
Because the legal lending limit violations have involved a
\nlarge sum of money and IBRA has mentioned the possibility of
\nlitigation, I have a question for President Habibie, Bank
\nIndonesia Governor Sjahril Sabirin, IBRA Chairman Glen Jusuf,
\nMinister of Finance Bambang Subianto, Attorney General Let. Gen.
\nAndi Muhammad Ghalib and National Police Chief Let. Gen.
\nRoesmanhadi:<\/p>\n
What concrete measures will you take against those major
\nviolators?<\/p>\n
The Cabinet, which touts itself as one of reform and
\ndevelopment, should respond to this question openly and explain
\nits plans on the eradication of the extraordinarily extensive
\ncorruption practices in the country.<\/p>",
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