Heavily tarnished BNI strives to come back with new strategies<\/p>\n
The discovery of a Rp 1.7 trillion (US$203 million) fraud case
\nat state Bank Negara Indonesia (BNI) has hurt the publicly listed
\nbank just as it was beginning to get back on its feet after the
\n1997-1998 financial crisis.<\/p>\n
The case exposed the bank's weak internal controls, which were
\nnot strengthened even after the government bailed out the bank
\nwith trillions of rupiah of taxpayer money to prevent it from
\ncollapsing.<\/p>\n
BNI's newly elected president Sigit Pramono spoke with The
\nJakarta Post's Rendi A. Witular about his strategies for
\nrepairing the bank's image and increasing its profit.<\/p>\n
Question: What are your plans for fixing BNI's image and
\nimproving its performance in the wake of the fraud case?<\/p>\n
Answer: We must admit that the bank has a very bad image now, and
\nat the same time it is in a crisis. The crisis here is not
\nbecause of numbers, but because of the eroding trust of the
\npublic and a growing distrust among the bank's employees.<\/p>\n
Thus, our first priority is to restore public confidence and
\nto eliminate distrust among the employees. Without their support,
\nit will be hard for the management to lift BNI back to its feet.<\/p>\n
We have set three restructuring stages for BNI: stabilization,
\nturnaround and transformation.<\/p>\n
For stabilization, we need around three months to implement
\nall of the programs needed, starting in January. During this
\nphase, we will launch several programs aimed at improving the
\nbank's human resources quality, career system and reward and
\npunishment procedures, in order to prevent employees from being
\ninvolved in corruption.<\/p>\n
We are also trying to improve our internal supervision system
\nby working together with Ernst & Young and by reforming our
\ninternal supervision unit.<\/p>\n
This unit was previously under the auspices of branch
\nmanagers; the branches paid their salaries and conducted
\npersonnel performance evaluations. To prevent a conflict of
\ninterest and any psychological barriers, we are removing the
\nunit from the branches' chain of command and putting it under the
\ncommand of the compliance director at headquarters.<\/p>\n
To lower the risk of nonperforming loans, we are also planning
\nto decrease the legal lending limit of 20 percent to about 10 to
\n15 percent of the bank's total equity, which currently reaches
\nabout Rp 9 trillion.<\/p>\n
We don't want to channel a huge amount of lending anymore,
\nbecause it will only jeopardize our business.<\/p>\n
Another effort to fix the bank's image is that we will become
\nmore transparent to the public. We will report any developments
\nor problems in the bank to the press. We are trying to prove that
\nwe are serious.<\/p>\n
After stabilization, there is a turnaround phase, which is
\nscheduled to last from April to June.<\/p>\n
During this phase, we will launch a "zero fraud" program aimed
\nat boosting the awareness of employees toward fraudulent
\npractices.<\/p>\n
After the turnaround stage, the bank is expected to enter the
\ntransformation stage, in which we expect that business at BNI
\nwill be back to normal. There is no schedule for this stage.<\/p>\n
In the end, all of our restructuring programs will be just a
\ntheory unless we are able to improve our revenue, net profit and
\n(financial) indicators.<\/p>\n
Do you feel that you are now working to clean up a huge pile of
\n"garbage"?<\/p>\n
No, I don't feel that way. Actually, BNI has a good business.
\nBefore the fraud case broke, all of our indicators and
\nperformance were fairly satisfying. But because of the scandal,
\nall the positive (facts) became at once negative.<\/p>\n
But this is BNI's fate. The bank had to be hit first by a
\nscandal in order to change. I think there is a "blessing in
\ndisguise" in the fraud case. If there was no such scandal, the
\nbank would feel perfect and would not change.<\/p>\n
What I am facing here is different than what I faced at Bank
\nInternational Indonesia (Sigit was the president of Bank BII
\nbefore taking over the top position at BNI in December 2003).<\/p>\n
BII had a vast and multicomplex problem but at a small
\nmagnitude. On the contrary, BNI has a small problem but at a huge
\nmagnitude.<\/p>\n
BNI will remain negative in the eyes of the public until its
\noperation becomes stable again.<\/p>\n
Are you sure that your restructuring efforts can be successful?
\nBNI was long been known as the "cash cow" for some government
\nofficials, and the government has always intervened in its
\noperation.<\/p>\n
Before I took the job, the government gave me an order to
\nrestructure BNI based on professionalism. And they promised they
\nwould not intervene in any way. Therefore, we will reject all
\nrequests from government officials which do not meet our
\nprofessional values and risk management standards.<\/p>\n
If the rejection has consequences for us (such as dismissal),
\nwe will accept it.<\/p>\n
We are now like in an aquarium, being watched by everyone. I
\ndon't think that anyone will dare to disrupt BNI because they
\nwould be on the spot.<\/p>\n
What will be the future focus of the bank's business?<\/p>\n
BNI is designed to be a universal bank. Overall, there will be
\nno changes. The bank just needs to sharpen its focus. We are
\nplanning to focus on markets that Bank Mandiri and Bank Rakyat
\nIndonesia (BRI) are not fully covering.<\/p>\n
For example, Mandiri's segment covers large and medium
\nbusinesses, while BRI covers medium and small companies.
\nTherefore, we are not playing to the largest or the smallest
\nsegments, but in between.<\/p>\n
For sure, we are not going to compete head-to-head with them.
\nOur businesses will not be as large as those handled by Mandiri.<\/p>\n
How is the development of the bank's secondary stock offering
\ncoming?<\/p>\n
The offering will remain on schedule because the government,
\nas the (controlling) shareholder of the bank, needs money to help
\nfinance the state budget deficit. BNI does not need the proceeds
\nfrom the offering because its capital adequacy ratio (CAR) is
\ndeemed good enough for three years lending expansion at Rp 9
\ntrillion.<\/p>\n
The recent quasi-reorganization has boosted our CAR to about
\n18 percent from 14 percent.<\/p>\n
We have proposed to the government to launch the offering in
\nthe early months of the second semester, because we still need
\ntime to restructure the bank.<\/p>",
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