Bankers interrogated

Bankers interrogated

The daily parade of bankers, both owners and directors,
arriving for interrogation at the National Police headquarters
and Attorney General's Office since early this month has
understandably dominated newspaper headlines. For most of them
were close cronies of either former president Soeharto or his
children who, during the Soeharto regime that came to an end
after 32 years in May, were seen as the "untouchables" to law
enforcement agencies.

It is nonetheless too early to judge as to whether the
authorities are really serious about bringing the tycoons to
court even though their protector has been dethroned. Moreover,
the Attorney General's Office's record in pursuing criminal
proceedings against corruptors has so far been disappointing,
either because of its lack of technical competence or because of
the corrupt mentality of many prosecutors and their high
vulnerability to political pressure.

We can recall the hurly-burly reportage of the intensive
interrogation of three central bank directors immediately after
their dismissal late last December for alleged wrongdoing in the
issuance of trillions of rupiah in liquidity support to problem
banks. Since then, neither the police nor the attorney general
has announced the outcome of the investigations.

However, given the strong public clamor now for the legal
punishment of anyone involved in corruption, nepotism, collusion
and crony capitalism, there is reason to be more optimistic that
the authorities will be more serious and persistent in going
after the recalcitrant bankers.

There is another factor which, we think, has become an even
more compelling reason for the government to crack down hard on
the delinquent bankers: recouping the Rp 140 trillion (US$12.8
billion) of liquidity support Bank Indonesia has already extended
to financially depressed banks. In view of the dire economic
conditions, huge state budget deficit and the specter of
hyperinflation, the government is under increasingly strong
pressure to collect the funds as soon as possible.

The central bank has set Sept. 21 as the deadline for all
banks which were suspended, closed or nationalized to repay the
liquidity support, or else the personal assets of the banks'
owners in other businesses will be seized.

The fact that more bankers have been summoned to the Attorney
General's Office than to the police headquarters indicates that
the central bank, at least for now, is more preoccupied with
recouping its funds through civil law proceedings than with
pursuing criminal cases against the delinquent bankers. The
Attorney General's Office, which has been empowered by the
finance minister to process the collection of the liquidity
funds, will surely be hard pressed to accomplish the task before
the deadline that is only two weeks away.

The settlement of the huge liquidity assistance is a test case
for the authorities to prove to the general public that they are
really serious about dealing objectively with the recalcitrant
bankers.

Retrieving the huge sum of taxpayers' money from the closed or
nationalized banks, though necessary, is, however, not enough if
viewed from the perspective of justice and, more importantly,
from the broader objective of promoting sound and strong banks.
The central bank and the Indonesian Bank Restructuring Agency
have firmly established that the closed and nationalized banks
have violated the legal lending limits by extending more than 20
percent of their total credits to the businesses of their owners
or directors. Some of the bankers have even admitted they
diverted the central bank liquidity funds to other companies.
Mohamad "Bob" Hasan, for example, has told police he used some of
the Rp 9 trillion (US$820 million) liquidity assistance loaned to
his bank -- Bank Umum Nasional -- to finance his pulp project in
Kalimantan.

These bankers should be brought to court even if they are
able to repay the central bank liquidity funds. The repayment
does not negate the fact that they have committed crimes. They
should be prosecuted under the 1992 Banking Act that clearly
stipulates that violators of the legal lending limits and
falsification of financial reports are liable to punishment of
between six and 15 years in jail. Only consistent law enforcement
will be an effective way to force the remaining bankers to obey
the law.