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.