BI plans bank risk management program

The Jakarta Post, Jakarta

In a bid to help equip the country's bankers with adequate skills and knowledge on bank risk management, the central bank is finalizing a ruling that will require certification for professionals working in a bank's risk management division.

The program is expected to enable bankers to identify and avoid operational risks that could harm their banks' financial health, Bank Indonesia deputy governor Maman Soemantri said on Tuesday.

"This program, drawn up by BI and the IRPA, is meant to produce skilled human resources, who possess high levels of competency in the fields of risk management, banking professionalism and ethics," said Maman.

The ruling will require banks to have their officers join the risk management certification program, which will be jointly run by the central bank and the Indonesia Risk Professional Association (IRPA).

"Also, we're preparing a sort of fast-track program for executives. We expect to finalize all this by the end of the year," he added.

The risk management program covers how to properly identify and minimize the risks involved in banking practices, most notably credit risks.

The new programs form part of the central bank's efforts to ensure the adoption of best banking practices in the banking sector -- whose image has been tarnished by a long litany of lending scandals, including most recently the cases of Bank Negara Indonesia (BNI) and Bank Rakyat Indonesia (BRI).

The fraud at BNI centers on the disbursement of some Rp 1.7 trillion in loans (US$200 million) to a number of bogus exporters, which was allegedly made available with the help of insiders.

Almost the same modus operandi was repeated in the Rp 294 billion lending scam at BRI, as the loan recipients turned out to have used false collateral.

Bank Indonesia has since pledged to introduce measures to avoid similar occurrences in the future.

The two lending scams emerged as the banking sector was struggling to recover from the devastating impact of the late 1990s financial crisis, which left many banks technically bankrupt and forced the government to come up with a costly bailout program. The banking crisis was partly caused by poor risk management as loans were not channeled properly.

Maman said that the certification programs would be applied over various stages as the needs at different levels of management also varied.