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A Bank Indonesia official claimed over the weekend that the central bank had tightened its scrutiny of troubled lenders, while appearing to acknowledge that officials were now afraid to rescue ailing banks lest they be attacked by lawmakers.

Speaking to reporters on Saturday, Halim Alamsyah, a BI deputy governor, said along with criminal sanctions, managers of troubled banks now faced tough administrative penalties if they were found to have mismanaged their institutions.

“The toughest is being blacklisted, meaning that bankers are barred from working in the financial sector by the government,” Halim said.

Since June, 20 small rural banks have been put under special state supervision after the central bank judged the quality of their assets to be unhealthy.

On July 21, a day before being approved by the House of Representatives as BI’s new governor, acting head Darmin Nasution said he was considering giving rural banks two and a half years to improve their balance sheets or face closure.

Halim added the central bank had a three-step plan in its supervision of rural banks, which highlighted the main forms of risk in banking and set up systems to deal with these risks.

Commenting on forced closures by BI, Halim noted that laws giving officials “weak” supervisory powers could stop officials from taking decisive action.

Many regulations in the law gave central bank officials the option to take over troubled banks, at their discretion, but did not specifically order them to do so, he said.

Speaking during his fit and proper test at the House on Wednesday Darmin intimated that BI officials, nervous of political criticism, may chose to take the path of least resistance and opt to do nothing rather than rescue a bank in trouble.

“Weak regulations are likely to leave BI supervisors in doubt as to whether they should take action on a troubled bank.” Darmin said.

Lawmakers singled out BI and Finance Ministry officials for sustained criticism for what they said was an illegal bailout of Bank Century in late 2008.

Constant pressure from lawmakers saw the eventual resignation of Finance Minister Sri Mulyani this year, despite many observers believing the case was politically motivated and had little legal basis.

Halim said laws on the banking sector would not be effective unless they laid out clear legal powers for BI officials.

He said it was up to the government and the House of Representatives to create better legislation, because BI had no authority to submit laws.