Tue, 15 Aug 2000

Travel ban planned for former bank owners

JAKARTA (JP): Attorney General Marzuki Darusman said on Monday that the government would impose a travel ban on former owners and management of 42 commercial banks who allegedly abused the government liquidity support.

Marzuki said the travel ban was needed to facilitate an impending investigation process.

"Minister of Finance Bambang Sudibyo has agreed to impose the travel ban immediately this week. We have also agreed to accelerate the investigation process," he announced following a meeting with Bambang and the head of the Supreme Audit Agency (BPK).

Bambang said he hoped to be able to issue the travel ban on Tuesday.

The government, through Bank Indonesia, channeled some Rp 144.5 trillion (US$17.41 billion) in emergency liquidity support to 48 banks between 1998 and 1999 in an effort to bail them out amid massive bank runs when confidence in the industry plunged to its lowest point and the country's financial crisis deepened.

Most of the banks were closed, while the others were nationalized by the government. But Marzuki said the travel ban would not be imposed on the former owners of nationalized banks. He did not give any reasons.

BPK said in its recent report that some Rp 138.4 trillion of the emergency loans (95 percent) were either misused or channeled in violation of bank regulations.

Marzuki said his office would first investigate the owners and management of 10 closed banks because the supporting data was sufficient.

"This is only the first stage," he said.

He said the owners and management of the other banks would also be investigated after gathering enough data.

He said the 10 banks included Bank BDNI, Bank Umum Nasional, Bank Pelita, Bank Modern, Bank Istimarat, Bank Servitia, Bank Utama (Bank Pesona), Bank Centris, Bank Deka and Bank Aspac.

He said the banks received total liquidity support amounting to Rp 34.7 trillion.

Marzuki acknowledged that there had been efforts to eliminate or damage the evidence by the former bankers.

He said this was also a reason why the government had to impose the travel ban.

Marzuki said the investigation process would also involve officials of Bank Indonesia due to a possible violation of bank rulings by the central bank's own people.

"We will also soon investigate the directors at Bank Indonesia," he said.

The government emergency loans were supposed to be used by the banks to reimburse depositors' money. But BPK said in its report delivered to the House of Representatives and the Attorney General's Office that the banks used the money for other purposes, including currency speculation, lending to affiliated business groups and for repaying subordinated loans.

The agency laid the blame for the misuse of the huge liquidity credits squarely on the extremely poor quality of the central bank's supervision.

The report said the central bank depended too much on off-site supervision (assessing written reports), whereas many commercial banks had manipulated their financial reports for years.

The Rp 144.5 trillion in emergency loans has now become the government's debt to the central bank. The government will issue bonds to cover the debt, but it wants to clarify first whether there was any wrongdoing in the granting of the emergency loans.

More than Rp 100 trillion of the loans were channeled to five banks -- the nationalized Bank Central Asia (BCA), Bank Danamon and the now defunct Bank Subentra, Bank Umum Nasional (BUN) and Bank BDNI.

The previous government signed an agreement with the owners of the banks on a mechanism to repay their obligations, but the present government has said it would revise the earlier agreement on grounds that it only benefited the former bank owners at the expense of the state or taxpayers. (rei/bkm)