Govt to wrap up Global's unfinished business

Govt to wrap up Global's unfinished business

Urip Hudiono, The Jakarta Post, Jakarta

An important final step in the shutdown of fraud-riddled Bank
Global International has ended, with the government finishing its
verification of the bank's depositor accounts, and honoring 79
percent of them, or 5,213 accounts worth Rp 818.9 billion (some
US$83 million) under its blanket guarantee scheme.

Some 1,485 accounts worth Rp 778.2 billion will however be not
be paid out, the finance ministry's Director General for
Financial Institutions Darmin Nasution announced on Thursday, as
the Finance and Development Comptroller (BPKP) has found them
linked to the fraud that had caused Bank Global to collapse.

Explaining the final verification, Darmin said that the BPKP
has concluded its validation of a remaining 1,888 accounts, which
had been left for further examination after the last verification
in April. The accounts were set aside because auditors were
suspicious that they were fictitious; used by Bank Global's
management in illegal "overdrafting" -- transferring numerous
funds into bogus accounts.

"Another 553 savings accounts worth Rp 142.31 billion and one
non-savings account worth Rp 5.2 million will also be covered,
Darmin said.

This means a total of Rp 793.44 billion in 5,146 savings
accounts and Rp 25.46 billion in 67 non-savings accounts will be
compensated under the blanket guarantee scheme, while a total of
Rp 274.5 billion in 1,362 savings accounts and Rp 503.67 billion
in more than 123 non-savings accounts -- which include sub-debt
bonds and mid-term notes -- will not.

The BPKP and UP3 had received data of 9,872 accounts worth Rp
1.25 trillion from Bank Global's management for verification.

The finance ministry's blanket guarantee implementation unit
(UP3), Darmin said, would start payments through selected BNI
branch offices on Aug. 3.

Under the scheme, the government must cover all banking
obligations to customers -- pending verification -- whenever the
authority closes down a bank.

Darmin said a team of banking legal experts the government had
consulted with on the case had concluded that the bank's
management had used at least three "overdrafting" bank fraud
methods, in which several depositors were found to have been
involved.

"However, to fulfill the sense of justice of some depositors
insisting they had nothing to do with the case, we have decided
to take this matter to the President for further advice," Darmin
said. He reiterated that the government would take legal action
against anyone involved in the fraudulent practices in Bank
Global.

Bank Indonesia officially closed down Bank Global on Jan. 13
because of its dire financial situation and overt evidence of
fraud in the institution.

Since the 1997 financial crisis, the cash-strapped government
has guaranteed all deposits -- using state funds -- to ensure
public trust was kept in banks, despite the still emerging cases
of internal bank fraud.

The government plans to establish a Deposit Insurance Agency
in September, requiring all banks to pay a fee of 2 percent to
fund the agency. By 2006, the fund will only guarantee an
individual deposits amounting to a maximum of Rp 100 million.