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)