BNI scam exposes new risk in banking sector: PIB
Dadan Wijaksana, The Jakarta Post, Jakarta
The New Indonesia Alliance (PIB) said on Wednesday that the Bank Negara Indonesia (BNI) lending scam had exposed poor internal control on the part of the bank, as well as the impotence of Bank Indonesia's supervisory mechanism.
As such it would pose a worrying threat to the still-fragile banking industry and put at risk hard-won public confidence in the sector, PIB told a media briefing here.
A panel of PIB economists including Sjahrir (who is also PIB chairman), Chatib Basri and Pande Radja Silalahi, shared the view that the scam simply confirmed that Indonesia had learned nothing from the last banking crisis in the late 1990s.
"This is worrying: After all the efforts to restructure the banking sector, we have still ended up with a poor supervisory mechanism for our banks.
"Despite the Rp 640 trillion of sacrifice, we're now back to square one," Sjahrir said, referring to the amount the government was forced to spend to bail the banking sector out of trouble.
He questioned the logic of how a central bank, with a supervisory function, had failed to smell anything fishy about the scandal until after August 2003, upon receiving BNI reports, while the credit graft itself had taken place from July last year.
Chatib focused more on its impact, saying that even now, public confidence in the banking industry was not that good, as evident from the large portion of short-term deposits that made up bank third-party liabilities.
"Currently, one-month deposits account for some 30 percent of the total, which shows a relatively low level of confidence in the sector. And now we have the BNI case.
"Such a fraud is liable to create shock waves. If this happens again, a second banking crisis is likely," Chatib said.
The fact that fraudulent behavior had occurred in a publicly listed bank -- which presupposes such an organization should have a high audit standard and tight disclosure requirements, should be sounding alarm bells, he added.
The scandal centers on the bank's failure to carry out a proper credit appraisal before allowing a Jakarta branch to disburse export credits to local exporters who held letters of credit guaranteed by foreign banks that were not BNI correspondent banks. The credits totaled Rp 1.7 trillion, of which Rp 580 billion has been returned to the bank.
The exporters claimed to be exporting certain commodities to Congo and Kenya, both African nations. However, it later turned out that the transactions had been faked.
On Wednesday, international rating agency Standard & Poor's placed its "B" long- and "B" short-term BNI ratings on CreditWatch with negative implications, following the scam revelation.
The CreditWatch placement comes after the government said it intended to call an extraordinary meeting next month to consider replacing senior managers of the bank.
The case has been highly publicized by media in the past weeks, although both Sjahrir and Chatib acknowledged a lack of objective analysis on the matter from experts.
"Maybe they're too busy, since becoming commissioners in private and state-owned companies," Sjahrir quipped, referring to a recent trend that has seen many analysts become company commissioners.
Meanwhile, in the latest development of the case, National Police chief Da'i Bachtiar reiterated that the investigation into the case would proceed, even though there had been talk of a proposal by the suspects to return the money.
"The investigation will still go on, because there has been a violation of extant legislation" Da'i said.
The police have so far detained 5 people for their alleged involvement in the scam, with six others still at large. Of the five, two are BNI officials while the others are from companies allegedly involved in the scam.