BI tightens control of bank owners

BI tightens control of bank owners

JAKARTA (JP): Bank Indonesia, the central bank, announced on
Tuesday its intention to curb the excessive intervention of
commissioners in the management of state-owned and private banks.

Bank Indonesia Governor J. Soedradjad Djiwandono said that
tighter control of the commissioners would be one of the
priorities of the central bank's working programs next year.

"I have started the campaign to further strengthen the drive,"
he said, adding that the move is essential to improve
professionalism in the banking industry and to protect the
public.

He acknowledged that many bank commissioners are not
professional.

Bank commissioners, most of whom are bank owners, often force
their will on management. These commissioners, he said, are more
a source of trouble than supervision.

"As the owners, they seem to believe that they can do anything
they want," he said.

Soedradjad said commissioners will even demand that credit be
provided when they know they are breaking legal lending limits.

"It is not right. Even though they are the owners, a large
percentage of the money is owned by savers and depositors," he
said, adding that such arrogance should not be tolerated.

Soedradjad said that the central bank's working program next
year will also make improvements on banking disclosure rules
through guidelines on lending policies, internal auditing and on
the issuance of annual and twice-yearly financial reports.

Soedradjad said that the guidelines will also require banks to
report on their managements' programs and their lending to
subsidiaries, members of their own groups of companies as well as
to their own commissioners and executives.

Such a requirement is important to ensure that banks abide by
the existing rule on lending limits, he said. (hen)