House proposes bank-closure bill

A'an Suryana, The Jakarta Post, Jakarta

The House of Representatives (DPR) has completed drafting a controversy-packed bill on bank closures.

Syamsul Balda, a legislator at the House banking commission, said on Thursday that the bill had been presented to the government and would be deliberated at the House in the near future before it was passed into law.

He said the House was using its right to initiate legislation.

Syamsul said the bill was meant to provide clear guidelines in closing down a bank and to ensure that bad bankers were punished accordingly.

He said that in the past, banking closure was filled with uncertainty due to a lack of clear guidelines.

He said the closure of banks in the wake of the 1998 banking crisis had triggered panic among depositors, which led to bank runs. This forced the government to bailout the banks, leaving taxpayers to cover the huge cost.

Syamsul also said that some bad bankers were immune from prosecution, despite their banks being bankrupted.

"We can no longer tolerate these things happening again in the future," he said.

But the weekly Kontan said the new bill contained controversial articles.

According to the bill proposed by the House, bank owners and top executives must be held responsible in covering the obligations of closed down banks.

The bill stipulates that the decision to close down a bank could be made by the bank's shareholders at a general shareholders meeting or by the commercial court at the request of the central bank.

The central bank will then appoint a liquidation team, which will act as a curator to manage the assets of the closed banks.

The bank liquidation team could ask the court to annul previous transactions made by the board of directors which had led to the closing down of the bank.

The team could also ask the court to annul any transfer of assets owned by the bank owners or top executives made during the 12-month period prior to the bank closure.

The board of directors would also face a one-year jail term or penalty of around Rp 100 billion (US$11.23 million) if they failed to produce the last balance sheet when the bank is closed down.

"We have learned from the experience that crooked bankers have managed to get away with their deeds," Syamsul said.

The government has injected massive amount of money into ailing banks suffering from bank runs in the late 1990s. But there have been allegations that the funds were misused by the bank owners and their executives, including using it for currency speculation and lending to affiliated businesses.

Asked when the House would deliberate the bill, Syamsul said "as soon as possible," but added that the House finance commission would first focus on debating the bill on government bonds.