BI steps up measures to prevent scams

BI steps up measures to prevent scams

The Jakarta Post
Jakarta

Bank Indonesia will issue new rulings early next year to prevent
fraudulent banking practices by pushing banks to be more prudent.

Central bank governor Burhanuddin Abdullah said on Monday the
exact substance of the regulations was still being discussed and
likely would be made public in mid-January.

"But the rulings will basically center on efforts to improve
the banks' conditions, especially their compliance with prudent
banking practices," Burhanuddin said.

Strengthening banks' internal supervisory controls, improving
the quality of bank loans and protecting consumers will be among
the key ingredients of the new rulings, Burhanuddin said.

All of these ingredients are essential for preventing banking
scams such as those at Bank Dagang Bali, Bank Asiatic and most
recently Bank Global.

Burhanuddin said these scandals tainted the image of the
industry, which overall had made significant progress since the
economic crisis.

"We hope we will not have to close down more banks next year
because of this. That is why we need these new rulings to help
make the banks more prudent," he said.

The central bank moved to close down Bank Dagang Bali and Bank
Asiatic earlier this year as their financial conditions worsened
due to a number of irregularities.

Bank Indonesia has put Bank Global under special surveillance
to prevent the bank's financial woes -- allegedly caused by
banking irregularities -- from worsening.

Earlier this month, Bank Indonesia renewed its cooperation
agreement with the National Police and the Attorney General's
Office to deal with banking scams.

Under the deal, law enforcers will have greater authority to
crack down on bad bankers.

At present, the country's banking law stipulates a maximum
penalty of 15 years in prison and a Rp 500 million fine for bank
fraud.

The central bank, however, has been criticized for responding
too slowly to indications of fraud.