Police detains Bank Global executives

The Jakarta Post, Jakarta

Police have detained eight executives of troubled Bank Global Internasional and have slapped travel bans to three others for alleged banking crimes.

The move on Tuesday could be seen as a sign that authorities are now more serious about cracking down on bad bankers.

National Police chief of detectives Comr. Gen. Suyitno Landung said the eight Bank Global executives in their custody had been charged with obstructing a police investigation.

"The executives intended to cover up their misdeeds by attempting to destroy bank documents on the order of the bank's operations director," said Suyitno.

The police released the initials of the eight executives: AK, DJ, DNR, IN, LH, PW, TS and YB. The three executives who have been banned from leaving the capital are AB, IR and RC.

Their detention and travel restriction comes following an announcement made late on Monday by Bank Indonesia that the operations of Bank Global would be suspended temporarily for one month.

The small bank's financial health had deteriorated sharply over the last couple of months due to fictitious lending activities and other banking fraud, said the central bank.

According to Bank Indonesia, Bank Global's capital adequacy ratio (CAR) had dropped to negative 39 percent. The CAR measures the financial health of a bank, and must be at a minimum level of 8 percent.

Elsewhere, Suyitno said the bank's management had been accused of using fake securities certificates to increase its CAR and allay the central bank's suspicions over its true condition.

The certificates were found to be false, as they were not registered with the Custodian Central Effect Indonesia (KSEI).

According to Suyitno, Bank Indonesia had actually noticed the irregularities in April, because Bank Global had reported an excess in securities that was not verified by reports from the Capital Market Supervisory Agency based on KSEI documents.

Separately, Minister of Finance Yusuf Anwar said the government would confiscate the bank's assets -- along with those of its controlling shareholders -- to finance the cost of recovering depositors' money in case the bank was closed down.

Under an existing blanket guarantee program, the government covers all liabilities of a bank that has been closed. According to data from the central bank, Bank Global has some 10,000 customers with deposits totaling about Rp 1 trillion,

He said a team had been set up to track down the bank's controlling owners.

According to one media report, more than 79 percent of Bank Global is owned by public investors, with the remainder belonging to PT Permata Prima Jaya and Intermed Pharmatama.

"The government will guarantee the depositors' money... The ministry will be authorized to sell its assets once the central bank has revoked the bank's operating license," said Yusuf.

The suspension of Bank Global and its financial trouble raises concerns once again of how the bad, old habit of managing banks die hard.

The country tumbled into the late 1990s economic crisis partly due to serious mismanagement in the banking sector. Earlier this year, authorities was also forced to shut down two smaller banks for deteriorating financial condition due to mismanagement.

Bank Global timeline:

* April: Bank Indonesia detects irregularities at Bank Global (BG)
September: BG announces Q3 financial reports, claiming a CAR of 44.84%
* Oct. 27: BI places BG under special surveillance for six months over indications that its CAR had fallen to below 8%
* Dec. 3: The Jakarta Stock Exchange (JSX) questions BG management over the bank's performance
* Dec. 6: BI inspectors are sent to conduct close supervision of the bank; BG management refuses to allow them access to files and several directors
* Dec. 9: JSX suspends trading in BG shares in early session, at which time they stood at Rp 340 per share
* Dec. 12: BG management attempts to destroy key documents that would indicate banking crimes
* Dec. 13: BI announces temporary, one-month suspension of BG operations, citing continued deterioration of financial health