Cenral Bank to boost measures to prevent scams

The Jakarta Post , Jakarta

Bank Indonesia will issue new rulings early next year to prevent fraudulent banking practices by pushing banks to be more prudent.

Central bank governor Burhanuddin Abdullah said on Monday the exact substance of the regulations was still being discussed and likely would be made public in mid-January.

"But the rulings will basically center on efforts to improve the banks' conditions, especially their compliance with prudent banking practices," Burhanuddin said.

Strengthening banks' internal supervisory controls, improving the quality of bank loans and protecting consumers will be among the key ingredients of the new rulings, Burhanuddin said.

All of these ingredients are essential for preventing banking scams such as those at Bank Dagang Bali, Bank Asiatic and most recently Bank Global.

Burhanuddin said these scandals tainted the image of the industry, which overall had made significant progress since the economic crisis.

"We hope we will not have to close down more banks next year because of this. That is why we need these new rulings to help make the banks more prudent," he said.

The central bank moved to close down Bank Dagang Bali and Bank Asiatic earlier this year as their financial conditions worsened due to a number of irregularities.

Bank Indonesia has put Bank Global under special surveillance to prevent the bank's financial woes -- allegedly caused by banking irregularities -- from worsening.

Earlier this month, Bank Indonesia renewed its cooperation agreement with the National Police and the Attorney General's Office to deal with banking scams.

Under the deal, law enforcers will have greater authority to crack down on bad bankers.

At present, the country's banking law stipulates a maximum penalty of 15 years in prison and a Rp 500 million fine for bank fraud.

The central bank, however, has been criticized for responding too slowly to indications of fraud.