Bapepam to probe firms linked to Global

Rendi A. Witular, The Jakarta Post, Jakarta

The Capital Market Supervisory Agency (Bapepam) is planning to investigate five securities houses over their involvement in helping executives of troubled Bank Global Internasional to falsely inflate the bank's assets, an official said.

Bapepam head of inspection and investigation Abraham Bastari said the agency would soon summon the five securities over strong indications that they were involved in giving false statements to the central bank over the amount of securities papers owned by Bank Global.

"We have inspected the five securities firms in June, and now we are planning to investigate them over an indication of their involvement in fraud," said Abraham at his office on Monday.

Abraham refused to disclose the name of the five securities firms.

According to a source at Bapepam, the firms had been giving false reports to Bank Indonesia by confirming that Bank Global securities papers could be financially verified. The securities certificates are used by the bank to increase its capital adequacy ratio (CAR) beyond the central bank's 8 percent minimum requirement.

The central bank later requested the Bapepam to verify their reports with a result that the securities papers were fictitious.

Due partly to this problem, Bank Indonesia announced last week a one-month suspension of the operations of the bank as its financial condition deteriorated -- the CAR level plunged from 44 percent in September to below the 8 percent level in October.

Elsewhere, rating agency PT Kasnic Credit Rating Indonesia regretted the decision by both Bank Indonesia and the Bapepam for being too slow in taking necessary action against the ailing bank, even though irregularities in its management had been apparent for several months.

"We are concerned that the central bank and Bapepam have refused to give an early warning signal about the irregularities, so we could have revalued our ratings on Bank Global and helped investors avoid losses," said Kasnic president director Jazid Adam.

In June 2003, Kasnic gave Bank Global Rp 400 billion (US$44.4 million) in subordinated bonds with an A-minus rating due to convincing reports from the central bank and the Bapepam over the bank's operation and performance.

"We gave the favorable rating based on reliable reports from Bank Indonesia and the Bapepam. We regret that the two institutions failed to provide us with sufficient data on the bank so that we could warn investors of any irregularities," said Jazid.

After the central bank announced on December 8 that it had decided to put Bank Global under its special surveillance unit on Oct. 27, Kasnic immediately lowered the bank's rating to BBB-, and later to D (default) after the central bank decided to suspend the bank's operations.

Over a dozen of the bank's bond holders, many of them pension funds, may lose the money they have invested if the central bank finally decides to liquidate the scandal-ridden bank.

Under the existing blanket guarantee program, the government will guarantee time deposits and savings of all liquidated banks. It will not, however, reimburse bond investors.

Subordinated bonds mean are unsecured and will be the last to get their hands on Bank Global's assets if it is to be liquidated.