BI blasted for slow response to Bank Global scandal

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.