BI suspends operations of Bank Global

BI suspends operations of Bank Global

Leony Aurora, The Jakarta Post, Jakarta

Bank Indonesia decided on Monday to temporarily suspend Bank
Global Internasional for a month as the financial health of the
small-size bank has continued to deteriorate.

Central bank senior deputy governor Miranda Goeltom said that
the publicly listed bank's capital adequacy ratio (CAR) had
dropped to minus 39 percent, compared to the central bank's
minimum requirement of 8 percent.

CAR, which measures capital against risk-weighted assets such
as credit, is a key indicator to gauge the financial health of a
bank.

"The decision of the board meeting of Bank Indonesia is to
temporarily freeze the activities of Bank Global for a maximum of
one month from tomorrow, Dec. 14," she told the press.

Bank Indonesia said in a press statement that Bank Global
suffered from the financial bleeding due to investment in
fictitious bonds worth about Rp 800 billion (US$89 million), and
fictitious lending activities worth Rp 30 billion.

"Various (proposed) measures to enable the bank to recover
including through the injection of fresh capital by the Dec. 13
deadline had not been fulfilled (by the owner)," it said.

The central bank also said the bank's board of directors had
been trying to obstruct Bank Indonesia's investigation work into
the bank.

"The directors have committed a crime by destroying and losing
(important) documents," Bank Indonesia said, adding that the
central bank had also requested the police and the Attorney
General's Office to prevent members of Bank Global's board of
directors from leaving the country.

The central bank had put Bank Global under its surveillance
unit for close monitoring since Oct. 27 following a decline in
the bank's CAR below the 8 percent limit.

The Jakarta Stock Exchange suspended trading in the shares of
Bank Global on Dec. 9.

Previously, some newspapers had reported an alleged scandal in
the management of the bank's mutual funds. Several of the bank's
mutual fund customers were reportedly unable to withdraw their
money.

The move to suspend Bank Global highlights efforts by Bank
Indonesia to clean up old bad habits here in running banks, which
plunged to near bankruptcy in the wake of the late 1990s
financial crisis. The industry is still recovering from the
devastating impact of the crisis.