BI urged to divulge list of errant bankers

BI urged to divulge list of errant bankers

JAKARTA (JP): The country's banking authority must disclose
the list of errant bankers to the public in order to increase
confidence among would-be investors, according to a legal
consultant.

Kartini Muljadi of Kartini Muljadi & Partners law firm said on
Monday that disclosing the errant bankers would help mend the
image of the country's cash-strapped banking industry.

Foreign investors will enter Indonesian banks only if they are
confident their money will not be misused, she said.

Kartini, one of Indonesia's most experienced lawyers, said the
1995 Bank Indonesia decree which stipulated the list of errant
bankers was confidential and designed only for the internal use
of BI had to be revoked.

"It's best if the decree is immediately revoked because it's
very important that those who have breached banking rules be made
known to the public, as well as what measures are to be taken
against them by the authorities," she told a seminar on good
corporate governance.

Indonesia's banking sector has been devastated by the current
economic crisis, prompting the government to inject more than Rp
140 trillion in liquidity support to keep banks afloat and
prevent the banking sector from collapsing.

The banking authority has acknowledged some of the problems in
the banking industry were caused by errant bankers who breached
prudential banking rules.

Bank Indonesia director Subarjo Joyosumarto said over the
weekend more than 1,000 people were included on the central
bank's list of errant bankers.

Subarjo said the central bank would not disclose the list
despite increasing public pressure.

However, he said the central bank had formed a team to
investigate possible banking crimes at 45 commercial banks.

He said one case involving two former directors of Bank Jaya
had been handed over to the police.

He added that two or three similar cases would be investigated
and the results would be given to the police.

The government launched a major bank restructuring program on
March 13, closing 38 banks, agreeing to recapitalize nine private
banks and taking over seven banks.

The government expects foreign investors to take part in the
recapitalization of the nine private banks, which is an essential
part of the country's bank restructuring program. The program is
designed to lift the country out of its current economic crisis.

The government is planning to provide up to 80 percent of the
required recapitalization funding for the nine banks by issuing
bonds.

Kartini said that in addition to disclosing the list of errant
bankers, it also was important that the government protect
minority investors in local banks.

She said that by virtue of its bank recapitalization program,
the government would effectively become the majority shareholder
in the recapitalized banks and would dominate the decision-making
process.

"What will be the attitude of the government as the majority
shareholder? It's crucial that the government be fair and ensure
that the rights of the minority (shareholders) are honored,"
Kartini said, adding that past experiences with state enterprises
were discouraging.

She said it was important for the government, as the majority
shareholder, to appoint directors and commissioners who could
uphold good corporate governance at the banks.

She said that according to government regulations, members of
a bank's board of directors and bank commissioners could not have
a criminal record and must have high moral standards. (rei)