Legal actions on bankers too late, economists say

JAKARTA (JP): Bank Indonesia's legal action against bankers suspected of steering their institutions into insolvency came too late and is dissatisfying in its focus on management of small banks, experts believe.

Economist Kwik Kian Gie said yesterday a police investigation against the management of nine insolvent banks for breaching the legal lending limit was too belated an action because the level of bad debt resulting from channeling bank credit to affiliated business groups -- thus exceeding the maximum level set by the central bank -- was already high by the early 1990s

Bank Indonesia embarked on the move, he believed, because of its frustration that massive liquidity injections into the troubled banks failed to help them recover.

"And I'm certain that the money won't be returned," he told The Jakarta Post.

BI director Achjar Iljas said Wednesday that the central bank had asked the police to investigate the management of nine of the 16 insolvent banks closed in November last year.

Col. Made Mangku Pastika of the National Police economic crime unit said the following day that five top executives of Bank Citrahasta Dhanamanunggal and Bank Dwipa Semesta would be tried for breaching the legal lending limit.

The violation carries a maximum six years in jail and a fine of Rp 6 billion.

The seven other banks under investigation are Bank Sejahtera Umum, Bank Harapan Sentosa, South East Asia Bank, Bank Pacific, Anrico Bank, Bank Kosagraha Semesta and Bank Pinaesaan.

BI also lent the government Rp 4.8 trillion to cover depositors' funds in the liquidated banks.

Kwik said that BI's move would not satisfy the public's demand for "justice" as it was only aimed at management and shareholders of small insolvent banks.

"The management and owners of the big insolvent banks must also be brought to the court," he said. He was referring to four banks declared insolvent but not named by the Indonesian Bank Restructuring Agency (IBRA) recently.

They are part of the six large private banks taken over by IBRA in January for using BI's liquidity funds in excess of 500 percent of their capital. The banks are Bank Danamon, Bank Umum Nasional, Bank BDNI, Bank Tiara, Bank Modern and Bank PDFCI.

BI has injected more than Rp 140 trillion since January into ailing banks to meet the withdrawal demand from panicky depositors. The six IBRA banks are the largest receivers of the bailout money.

Kwik recommended legal action be pursued against the bad debtors because insolvent banks were suspected of pumping most of their deposits to prop up their business network.

"The bank owners are also usually their large debtors," he said. But he doubted whether legal action would be taken against owners of the big banks and the politically well-connected bad debtors.

Banking analyst Laksamana Sukardi agreed earlier this week that it would be unfair if bad debtors were allowed to get off scot-free.

He believed President B.J. Habibie should directly oversee the handling of the banking problem, including dealing with banking crime because of its severity and the urgent need to quickly rebuild the shattered sector to lift the country out of its year- long crisis.

Umar Juoro, a senior economist at the Center for Information and Development Studies, also said legal action must be taken against the management and owners of the 16 banks closed in November, the six troubled banks under IBRA and BI senior officials who were delinquent in their supervisory duties.

He recalled three BI directors who were accused of corruption last year, but there was no subsequent indictment.

"I expect the authorities to show the public that they're serious and not discriminating in whether to take legal action against delinquent bankers," he said yesterday. (rei)