May 24, 2011

BI imposing sanctions to Bank Mega

The Indonesian central bank, Bank Indonesia, today decided to impose several sanctions to PT Bank Mega Tbk related to PT Elnusa Tbk gate.
One of the sanctions required the bank to stop adding new customer of deposits on call and cease opening new branches within one year.
In a press release described as a follow-up on the issue of Elnusa and local government of Batubara’s funds which occurred at Bank Mega, branch office (KCP) Bekasi Jababeka, Bank Indonesia has conducted a special investigation to ensure the violation of applicable provisions.
"The investigation found any violations of the bank's internal regulations as well as weaknesses in risk management as reflected in the infirmity of standard operating procedure [SOP] and internal control as provided in regulation of Bank Indonesia No. 5/8/PBI/2003,"said Chief Public Relations Bureau of BI Difi A. Johansyah in official website of Bank Indonesia today.
Meeting of the Board of Governors of Bank Indonesia on May 23, 2011 decided on several actions. First, Bank Mega is obliged to halt adding new customers of deposit on call and extending old customer’s account in DoC for 1 year. 
It includes similar products such as negotiable certificate of deposit (NCDs). The bank also requires to stop opening of new branch for 1 year. "Sanctions are valid from May 24, 2011," he said.
In addition, Bank Indonesia shall conduct fit and proper test of management and executive officer of Bank Mega. The central bank has also instructed Bank Mega to review all policies and procedures, particularly in funding activities, including setting targets, limits and authority for branch offices, supporting branch offices, cash offices and individuals, both in nominal and interest rate, and also determining the working area of its branch office and the mechanism in initiation of new customers.
"Improving internal control and risk management, including the adequacy of auditors in each office, check and balance process through stages of the authority and system, oversight function of the headquarter under on its branch offices and the principle of ‘knowing your employee’."
Difi also said that Bank Mega will lay off its employees under the executive officer who involved in the case.
According to him, the steps taken by BI are part of an effort to protect the interests of customers and maintain the credibility of the banking industry.

Disclosure: No position at the stock mentioned above.

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