City-owned bank to become limited liability company

JAKARTA (JP): The Jakarta administration will change the status of city-owned Bank DKI into a limited liability company starting early next year to enable it to be more competitive and flexible, the bank's president, Soeharto, said on Monday.

Soeharto said the change was expected to shorten the lengthy and arduous bureaucratic system currently adopted by the banks' management.

"After the status change, the bank's policies will be in the hands of shareholders at their general meetings and the most important thing is that the bank will have a greater chance to increase its capital," he said after attending a meeting on the bank's status at City Council.

"Under its current status, if the bank changes or passes a certain policy its management must submit a proposal to several institutions/people: the governor, the Ministry of Home Affairs, Bank Indonesia and the Ministry of Finance, head of City Council Commission C for financial affairs Amarullah Asbah.

"If it is a limited liability company, the policymakers are the bank's shareholders," he said.

All other 26 provincial banks throughout the country will also become limited liability companies, he said.

Amarullah said the council welcomed the plan as it would enable the bank to be more flexible in line with the market law.

He said the change in status had been approved by the Ministry of Home Affairs, which had also instructed all local administrations to submit drafts on provincial banks' bylaw early next month.

Bank DKI, which was established in 1961, has 11 branches throughout the city. The city administration is the sole shareholder.

Compared to other provincial banks, Bank DKI has the biggest financial capital with Rp 358 billion, according to Amarullah.

He said the bank's change in status would not reduce its obligations to the administration.

"The bank will still be obliged to contribute to city revenues," he said, adding that in the 1998/1999 fiscal year the bank was expected to contribute Rp 40 billion.

He also said Bank DKI should have made preparations for the new status, including involving its manpower, management and capital.

In a related development, Soeharto repeatedly refused to comment on media reports about his role in Rp 172 billion in bad credit at the bank.

"There will be a party which will determine whether I have done something wrong," he said.

Governor Sutiyoso said on Thursday he would soon replace Bank DKI's three top officials, including Soeharto, due to the bad credit.

The other two to be replaced are director of general affairs Djunaidy Albaghdady and director of marketing Bassar Soetardjo, who is also in charge of channeling loans.

The bank has been under scrutiny ever since the extent of its bad loans was uncovered mid last month.

It is believed the bad loans were mainly caused by the bank president's alleged authoritarian management style, especially in the process of granting loans, and his reported disregard of a company's accountability or credibility. (ind)