BI to fight court ruling in bank closure case

BI to fight court ruling in bank closure case

Tony Hotland, The Jakarta Post, Jakarta

Bank Indonesia will soon file an appeal to the Supreme Court to
counter the Jakarta Administrative Court's recent verdict that
ruled in favor of the now defunct Bank Dagang Bali (BDB).

Deputy director of legal directorate at the central bank Oey
Hoey Tiong said on Monday the verdict proved the court did not
take prudent banking practices seriously and it had the potential
of incurring state losses.

"The verdict itself has some contents that we have questions
about. It shows how the court disregarded the central bank and
the implementation of prudent banking practices in the country,"
he said.

Oey said the court had solely based the verdict on the
plaintiff's argument that the central bank had not given
sufficient time and assistance to BDB in claiming its credits in
four other banks in order to meet the central bank's minimum
capital requirement.

"We have proven to the court that there were no credit left
that BDB could claim. Their funds in the four other banks had
already been used as collaterals (by a shareholder of the bank to
borrow money from the four banks)," he argued, adding that the
banks would not return the money unless the shareholder repaid
its debts.

Oey added that the central bank had already provided enough
assistance and special supervision for the bank -- BDB had
previously entered the central bank's special surveillance unit
twice -- but to no improvement.

Bank Indonesia closed Denpasar-based BDB in April due to
worsening finances resulting from transactions involving bank
assets worth Rp 1.2 trillion (about US$131.8 million) used as
collateral by BDB shareholder to borrow money.

The Administrative Court issued a verdict last week that
annulled the central bank's decision to shut down BDB and obliged
it to restore BDB's status and condition.

BDB's owners have planned to immediately set up a special team
to deal with the restoration of the bank's management and
employees upon learning the court's verdict.

"Even if we wanted to go with the verdict, there's nothing we
can do because BDB's status as a legal firm had been revoked by
Denpasar Court. So, if BDB wants to continue with this fuss, they
should file a complaint against Denpasar Court instead," said
Oey.

Furthermore, he said, the verdict could incur losses to the
state because the government had already repaid BDB's depositors
under the blanket guarantee program.

"So, with this verdict, they can have the bank back and don't
have to serve their obligations to the depositors as it had been
done by the government. What was the (administrative) court
thinking? It's the government who's losing here, especially amid
their tight budget," Oey said.