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"Even if we wanted to go with the verdict, there's nothing we can do because BDB's status as a legal firm had been revoked by Denpasar Court.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.