Jamsostek sues ailing bank to recover funds

Ridwan Max Sijabat, The Jakarta Post, Puncak

State-owned insurance company PT Jamsostek and other depositors of Bank Global International have formed a strong alliance to file a lawsuit against the bank's stakeholders in a bid to recover their money from the ailing bank.

Jamsostek's president Achmad Djunaidi said that following a meeting in Jakarta over the weekend between the bank's depositors and Bank Indonesia's deputy governor Miranda Gultom, the depositors unanimously agreed to hire a renowned lawyer to represent them in the lawsuit.

"We will ask the court to trace all assets of the bank and of the stakeholders so that they can be used to pay the bank's obligations to its depositors," he said in a press gathering here on Sunday.

Jamsostek's investment director Samuel Tobing who accompanied Djunaidi in the meeting of depositors, acknowledged that depositors would face difficulties in recovering their funds from the bank because a majority, or 70 percent, of the bank's stake belonged to the public.

"We will do anything to recover our as much of our money as possible. But if we fail to do so, (no problem), as Jamsostek still has reserve funds in anticipation of such an incident," he said.

The central bank announced last Monday that it had temporarily suspended the bank's operations as its financial indicators had deteriorated sharply over the last two months, allegedly due to fictitious lending activities and other banking fraud.

Bank Global's capital adequacy ratio (CAR) had dropped to minus 39 percent and its management was accused of using fake securities certificates to increase its CAR. The CAR measures the financial health of a bank and must be at a minimum of eight percent.

The police have arrested several executives of the bank.

Samuel explained that Jamsostek invested Rp 100 billion (about $10 million) in bonds issued by the publicly listed bank in May 2003. They were 10-year bonds with an annual interest rate of 7 percent.

"Jamsostek's management decided to invest in the bank because the central bank's audit put the bank on the list of healthy banks with an A rating. Furthermore, it was offering an attractive interesting rate.

"So, our investment in the bank complied with Government Regulation No. 28/1998 requiring Jamsostek to use extraordinary caution and apply secure principles when making investments," he said.

Despite the Bank Global case, Jamsostek would continue investing in stocks and securities certificates, including bonds and mid-term notes (MTNs), to gain maximum profit.

Samuel denied the allegation that the management had received fees for investing in the bank, saying Jamsostek bought the bank's bonds through its initial public offering.

"Not only Jamsostek but also state oil company Pertamina, the pension funds of the Indonesian Churches's Communion (PGI) and several other churches have invested in the bank because of the central bank's report about Bank Global's good condition," he said, citing that long before the bank's collapse, Jamsostek had several times tried to sell the bonds but there were no interested buyers.

He also questioned Bank Indonesia's performance in carrying out its supervisory role.

"If the central bank fails to improve its supervision over all banks, its credibility will be put at stake and foreign investors will be reluctant to invest in the banking sector," he said.