BI plans bank risk management program

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.