Suspension of banks

Suspension of banks

Minister of Finance Fuad Bawazier announced on April 4, the
suspension of seven banks and another seven banks placed under
the supervision of the Indonesian Banking Restructuring Agency
(IBRA). It was also announced that the liabilities of the first
group of banks toward their customers would be taken over by BNI
and that BNI would take care of matters pertaining to payment to
customers.

The suspended banks will not be liquidated. This means that as
limited liability companies, the banks still exist. As a result,
the legal consequences are as follows:

1. The banks' shareholders still control all the assets of the
banks as limited liability companies -- both fixed assets (such
as land and buildings) and movable assets (such as motorized
vehicles, computers, etc.). Only the shareholders reserve the
right to sell these assets. The government doesn't have the right
to sell these assets, let alone sell the personal assets of the
shareholders.

2. Manipulation and collusion practices may have been done in
that the assets of the banks and the personal assets of the
shareholders have been sold (transferred to other parties) before
the government, in this case IBRA, can get hold of them. Can the
government exercise tight control over this matter and give its
assurance that there will be no such practices, including those
involving certain IBRA personnel?

3. As for other banks (about 47), which are categorized as
financially unsound and under IBRA monitoring, the boards of
directors and the shareholders may still have an opportunity to
collect the assets and sell them to other parties before the
government decides to suspend the banks'.

4. According to civil law, the shareholders of suspended banks
assume responsibility for all the banks' liabilities, including
the personal assets of the shareholders themselves. However, it
may happen that out of slyness, these shareholders transfer the
banks' assets as well as their personal assets to other parties.
Can such acts be criminally sued? Or, do they belong only to the
realm of civil law, which involves a slow process and is easily
tricked?

In my opinion, in an effort to restructure the banking system,
it is the government which will be most disadvantaged because it
will have to bear all the banks' liabilities, especially when the
proceeds from the sales of the banks' assets are not sufficient
to cover the liabilities, and the personal assets of the
shareholders are nowhere to be found.

If the government has to sustain such losses, this means the
burden must be borne by the entire Indonesian population (through
taxes). Those who enjoy the biggest profit and can afford to
laugh are the shareholders of the banks because they have easily
pocketed the government's funds through liquidity credits
extended to them (their banks) by Bank Indonesia. Those borrowing
from the banks are their own cronies.

I don't think the government needs to help banks which are
financially unsound and have disadvantaged people. They must be
quickly liquidated. Let the shareholders, pursuant to the
prevailing laws, assume their responsibilities to customers.

Do not sacrifice the people all the time because they have
suffered enough as a result of the monetary crisis brought about
by business tycoons, including these financially unsound banks.
Unlucky indeed is the fate of the people.

SUHARSONO HADIKUSUMO

Jakarta