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String of Bank Scandals Keeps BI on Its Toes as Regulator of the Industry
Dion Bisara | December 30, 2011

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Indonesia’s banking sector was rocked by a series of scandals and fraud in 2011, putting Bank Indonesia under the spotlight for its supervisory role.

In March, a bombshell hit as police announced that Inong Malinda Dee, a Citibank Indonesia relationship manager, was arrested for embezzling at least Rp 17 billion (she was later indicted for Rp 40 billion, or $4.4 million) from clients.

Then, just a few days later on March 29, a 50-year-old politician, Irzen Octa, died in mysterious circumstances after meeting with debt collectors hired by the bank, at Citibank’s office on Jalan Gatot Subroto.

He was supposedly there to discuss how his credit card debt had ballooned to Rp 100 million.

In May, the central bank placed sanctions on Citibank: no new credit card customers for two years, no priority banking clients for one year and no new branch openings for one year.

The scandal quickly had a domino effect. The central bank on May 2 ordered 23 banks, including local lenders, to stop signing up customers for high-end premium accounts for at least a month amid a probe into an embezzlement case at Citibank Indonesia’s wealth management unit.

But pressure from lenders led the central bank to lift the ban on June 3. Citibank’s sanctions were not lifted, however.
 
A month after Citibank’s woes, Bank Mega experienced problems of its own, when a branch manager colluded with a regional government official to steal state money.

Bank Mega was also forced to delay expansion plans when the central bank handed down a year-long ban on opening new branches.

News in October that a central bank deputy governor, Budi Mulya, received a Rp 1 billion loan from a former Bank Century co-owner just months before Century was bailed out added new fuel to the long-running controversy.

Budi was suspended and no longer manages monetary and foreign exchange policy.

By early 2013, Bank Indonesia is slated to relinquish its supervision duties to a new superbody called the Financial Service Authority (OJK).