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.