BI to fight court ruling on BDB case

BI to fight court ruling on BDB case

Dadan Wijaksana, Jakarta

Bank Indonesia said on Friday it would stick by its decision
to close down Bank Dagang Bali (BDB) in April, and that it was
ready to defend it, despite a recent court ruling putting on hold
the liquidation policy.

On Thursday, the Administrative Court ruled that the
revocation of BDB's operating license -- a decision issued by the
central bank -- was temporarily suspended. No explanation was
available as to what reasons were behind the court's decision.

The ruling would appear to mean, as stated by the bank's
lawyers in advertisements placed in a number of publications on
Friday, that the management of the bank can take back control of
BDB, which is currently managed by a government-sanctioned
liquidation team.

However, Bank Indonesia senior deputy governor Anwar Nasution
stressed that the central bank was worried by the ruling as it
had acted in this case in line with the prevailing regulations
and its powers as the banking sector regulator.

"I think it's clear that we will do whatever we can do to
defend our position.

"They (the bank's owners) made mistakes. That's why we closed
the bank down in the first place. We will appeal all the way up
to the highest level should this prove necessary," Anwar said.

The central bank closed BDB, a small commercial bank, along
with Bank Asiatic, in May due to worsening finances resulting
from illegal transactions involving loans worth Rp 1.2 trillion
(about US$140 million).

Bank Indonesia alleged the two banks, which are owned by two
families related by marriage, had been mismanaged and had
violated banking regulations -- causing irredeemable liquidity
problems.

According to Bank Indonesia, loans owed by Asiatic made up the
majority of the total transactions in value terms. The problem
came to light after BDB placed funds with Asiatic in the form of
interbank loans and Negotiable Certificates of Deposit (NCD) and
Interbank Call Money (IBCM) with a combined value of close to Rp
1 trillion.

These were later used as loan collateral by the son of a BDB
owner, who is married to a daughter of a Bank Asiatic owner.

When the loans turned sour, BDB was then forced to set aside
huge previsions, something that severely eroded its finances.

Elsewhere, Anwar said that the liquidation team would continue
its work regardless of the court ruling.

The team has started to identify and seize assets belonging to
the two banks, and begun disbursing some of the depositor funds
placed with the banks.

BDB is owned by I Gusti Made Oka, while Tong Muk Keung owns
Asiatic.

BDB is a Denpasar, Bali-based lender which has 31 branches and
632 employees. Asiatic employed around 150 staff and has 16
branches.

In Friday's advertisements, BDB's lawyers warned the public
not to become involved in any transactions involving the bank's
assets, or the assets of bank's shareholders.