Police asked to investigate bankers

Police asked to investigate bankers

JAKARTA (JP): Bank Indonesia has formally asked the police to
investigate the management of nine banks closed down late last
year on suspicion of violating banking laws, a Bank Indonesia
director said here yesterday.

Achjar Iljas did not name the banks, nine of 16 liquidated by
the government last November, but confirmed that one of the
violations was breaching the legal lending limit.

He said that loans made by the banks to their owners and
affiliated companies had exceeded the maximum level set by the
central bank.

"I think the matter is worthy of police investigation," he
told reporters yesterday after speaking at a seminar on banking
and monetary policy.

Achjar said the central bank filed four cases with the police
in May, two in June and three more in July.

He added that the central bank would continue to study the
affairs of other banks and would report them to the police if
necessary.

The government liquidated 16 insolvent private banks in early
November last year as part of efforts to restructure the ailing
banking sector.

The banks liquidated were Bank Andromeda, Bank Jakarta, Bank
Pacific, Bank Industri, Bank Pinaesaan, Anrico Bank, Astria Raya
Bank, Bank Harapan Santosa, Bank Guna Internasional, Sejahtera
Umum Bank, Bank Umum Majapahit Jaya, Bank Kosagraha Semesta, Bank
Mataram Dhanarta, Bank South East Asia, Bank Dwipa Semesta and
Bank Citrahasta Dhanamanunggal.

Bank Andromeda was owned by Bambang Trihatmodjo, the second
son of former president Soeharto; Bank Jakarta was controlled by
Probosutedjo, Soeharto's half brother; and Bank Pacific had close
connections to Ibnu Sutowo, a close friend of Soeharto.

Although the government guaranteed deposits in the 16 banks,
the liquidation sent shockwaves through the domestic banking
sector and sparked off massive runs on other banks.

The central bank then had to provide more than Rp 140 trillion
in liquidity to help banks meet the demands of depositors
clamoring to withdraw their money.

In January the government froze the operations of seven
private banks and put a further six under the management of the
Indonesian Bank Restructuring Agency (IBRA).

The six banks are Bank Danamon, Bank Umum Nasional, Bank BDNI,
Bank Modern, Bank Tiara and Bank PDFCI. The banks have received
Bank Indonesia liquidity credits in excess of 500 percent of
their capital.

Four of the banks under IBRA management have been declared
insolvent but their names have yet to be made public.

Some are demanding the authority close down the insolvent
banks immediately and bring their management and owners to trial
for using depositors money illegally for their own purposes and
for failing to pay back massive liquidity credits provided by the
central bank.

Bank Indonesia Governor Sjahril Sabirin, however, said that
liquidity credits to the troubled banks had been secured against
their assets, including bank owners' personal assets.

"We are working hard to secure the liquidity credits," he told
the Supreme Advisory Council on Tuesday.

Banking analyst Laksamana Sukardi said the investigation of
troubled banks should focus on those which violated the legal
lending limit criteria.

"We have to bring the management and owners of banks who have
channeled credit into their own groups to justice," he said.

He added that debtors who fail to pay back their loans should
also be brought to court.

"The financial authorities must be careful about handling this
type of case so that they maintain their credibility," he said,
pointing out that a distinction should be made between banks
afflicted by the monetary crisis and those that are in trouble
because of the malpractice of their owners and management. (rei)