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.