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)