BI blasted for slow response to Bank Global scandal

Rendi A. Witular and Eva C. Komandjaja, The Jakarta Post, Jakarta

The failure of Bank Indonesia (BI) to take immediate and stern action against troubled Bank Global Internasional, despite sufficient indications of fraud, has raised concerns over the central bank's seriousness in cracking down on bad bankers.

Critics said BI had been lenient with regard to irregularities it found at Bank Global in its reluctance to suspend the small- sized bank's operations.

Director General of Financial Institutions Darmin Nasution at the Ministry of Finance said the central bank should have suspended the operations of Bank Global earlier, as the Capital Market Supervisory Agency (Bapepam) had provided it with sufficient proof of banking crime a long time ago.

"In addition to the delay, it remains unclear what kind of suspension was imposed on the bank. Is it temporary or permanent? Manipulation appears to have occurred here, and BI should take stern and clear measures," said Darmin on Wednesday.

A source at the finance ministry said BI should have suspended Global's operations in June, when it requested Bapepam to verify the bank's securities certificates.

In response, Bapepam warned BI that Global's securities had not been registered with the Custodian Central Effect Indonesia (KSEI), which signified that Bank Global management had made a clear attempt to commit fraud.

"Upon receiving such facts, BI should have taken stern action against the bank's management before further losses were incurred... (Instead) it took four months before BI took proper measures," said the source, requesting anonymity.

"I think BI would never have penalized Bank Global if the media had not sniffed out the irregularities and the issue made headlines," the source said, adding that the police should have probed BI's failure to carry out its supervisory function.

BI announced on Monday it had temporarily suspended Bank Global's operations for one month, as its financial health had deteriorated sharply over the last couple of months on fictitious lending activities and other banking fraud.

Bank Global's capital adequacy ratio (CAR) had dropped to negative 39 percent, and its management accused of using fake securities certificates to increase its CAR.

The CAR measures the financial health of a bank, and must be at a minimum level of 8 percent.

Darmin said although the publicly listed bank had no majority shareholders, BI needed to immediately identify those responsible for managing and controlling the bank. The finance ministry could then move quickly to confiscate their personal assets to finance the cost of recovering depositors' money, in case the bank was closed down.

Under existing regulations, shareholders with a minimum 20 percent shares are categorized as controlling shareholders and are thus obliged to relinquish their personal assets to guarantee depositors' funds.

However, no shareholders in Bank Global hold 20 percent shares: public investors own 79 percent of the bank, 9.09 percent is held by PT Permata Prima Jaya and 11.51 percent by PT Intermed Pharmatama.

Elsewhere, the police have arrested two more employees of Bank Global and are trying to locate the bank's president director, Irawan Salim, director Rico Santoso and a bank employee named Steven.

National Police deputy chief of detectives Insp. Gen. Dadang Garnida said they had contacted the Singaporean police and the National Central Bureau's Interpol to help track them down.