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contents
available as open access
International
Journal of Finance and Banking
journal homepage: http://www.journaloffinance.net
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International
Journal of Finance and Banking 01, 01 (2014):
01-12
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The arena
of multiinterest, governance and fraud – a critical review of BC bailout
Ruddy Tri Santosoa*, Hartonoa, M.
AgungPrabowoa, Guntur Riyantoa, SujokoEfferinb,
YennyTjiamudjajac
aFaculty
of Economic and Business, University of SebelasMaret (UNS). Surakarta.
bFaculty of
Business and Economic, University of Surabaya (UBAYA) Surabaya
ccEditor.
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H I G H L I G H T S:
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1.
In the end
of 2008, the global financial crisis had some impact to the Indonesian
economy.
2.
According
to the government of Indonesia, PT. Bank Century’s defaults was influenced by
the global financial crisis
3.
The
government of Indonesia believed that BC should be bailed out because if it
was closed, it would have caused systemic impact to the entire Indonesian
economy.
4.
The
judgement of systemic criteria and the decision to bail out neglected some
prudential aspects.
5.
The major
reason of bail out was that the bank was too politically significant to fail.
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Article History
ABSTRACT
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Received: 10-05-2014
Accepted: 00-00-0000
Available online: 00-00-2000
Keywords:
Bank bailout;
Governance;
Fraud.
Too politically significant to fail
JEL Classification:
??
???
???
???
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The bailout of BC at the end of 2008
ignites many debates. If the Indonesian Central Bank had not bailed it out,
would it have been a systemic disaster for Indonesian economic? BC’s total
assets were not significant to the national banking asset. Why was it so
important to bail BC out? This research wants to find answers to the
following questions: 1) considering the internal problems of BC since 2005,
was it worth to bail it out, and was the amount paid appropriate? 2) How bad
was the internal problem in consideration of corporate governance theory,
fraud theory, and in accordance with prudential banking principals? 3) Was the decision to bail out relevant
for the national banking stabilization? 4) Was the failure of BC in 2008 a
symptom of market failure, or a governance failure of BC and a regulation failure
of the Indonesian Central Bank? This research uses descriptive qualitative
method by in-depth analysis. The qualitative variables are classified to some
significant factors which influence the decision to bail out. The result of
this research shows that before the government decided to bail BC out, the
historical performance, the corporate government and the fraud of the bank
were not appropriately reviewed. Even though the
bailout was able to keep the national banking stabile at that time, the judgment of the
decision was not purely economical. The non-economic factor was that the bank
was too politically significant to fail.
© 2014, MIR Centre for
Socio-Economic Research, USA.
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1.0
Introduction
BC was
founded from a merger of three banks at December 6th, 2004. The
banks were PT. Bank CIC International, PT Bank Pikko, and PT. Bank Danpac. Historically, PT Bank CIC had some fictional
and high-risk transactions. The amount was up to US$25Billion. Regulation
requires the bank to accumulate PPAP, which in turn result in negative Capital
Adequacy Ratio (CAR). Bank Pikko contained Texmaco’s bad debt, which was
changed to Dresdner Bank Medium Term Notes (MTN). The low quality of MTN
required the bank to accumulate a big amount of provisions in loan losses,which
in turn also result in negative Capital Adequacy Ratio (CAR)?
In
Indonesian Central Bank report dated at October 31, 2005 found that the CAR of
BC dated at February 28, 2005 (two months after merger) was negative132.5%. Due
to regulation, since the report the bank should be put in special surveillance.
In fact, the bank was normally operating until the end of 2008. Global
financial crisis finally caused liquidity crisis to the bank. The bank was
marked as a systemic risk bank, which legalized it to be bailed out. So the
government had to put in some temporary equity.The phenomena in Bank Century
case is interesting to further studying, considering long before the bank
already had problems that climaxed in Global financial crisis. This ignites a
question, why it should be marked as a systemic risk bank?
Kaufman
(1996) finds that a bank bankruptcy in fact is as common as any other
bankruptcy. They are caused by non-prudential regulation, inefficiency and
contra productivity. Davis (1992) argues that people are more afraid to
financial and banking systemic risk rather than other sectors such as
automotive or real estate, because the intangible situations are more difficult
to predict. Mark Flannery (1995) has similar argumentation with Davis, bank
bankruptcy costs higher so banking business is unique, and it always needs
financial assistance because it includes social aspect and politic of business
are sensitive to conflict, these factors require the prudential principles of
the banking industry.
Researches
of the bank bailout done before emphasize on bank failure caused by
non-prudential conduct in normal situation. They do not consider the financial
crisis, also not in Indonesian context. This research unique because it reviews
a bank bailout in a global financial crisis and that Bank Century was the only
bank undergone liquidity crisis which needed to be intervened by Indonesian
government. This research also argues that the failure of Bank Century was not
market failure, but governance and regulation failure. The failures had
happened before global financial crisis. This enlightens the theory of how a
bank bailout should be done in time of the financial crisis.
This
research will: a) review financial
performance of BC, b) review financial performance ratio by various financial
theories to explain the feasibility of BC, c) qualitatively analyze the
application of corporate governance and fraud theory in BC.
The goals
of this research are:
1.
To
review financial performance of BC by financial theories. To give empirical
proof that the amount of government temporary equity is adequate to bail out
BC. To review systemic impact of BC to the national economy.
2.
To
find out if it is feasible to bail out BC when it is reviewed by corporate
governance theory and fraud theory.
3.
To
take a lesson from this case, for more effective decision making when the
government need to intervene in banking sector to stabilize national banking.
To find out if government temporary equity able to stabilize the banking
sector.
4.
To propose a new theory of bailout bank, to
avoid governance failure and regulation failure.
This research uses interpretative
qualitative method to explain the case of PT. BC. Compared to the quantitative
method, Qualitative method is unique because it can do an in-depth analysis to
the related factors and/or actors. Data collection by interviewing gives
opportunities to analyze the truth at the time being.
2.0
Literature review
Former
researches about the systemic impact of bank performance are using traditional financial theory.
Those researches analyze bank performance from a fundamental aspect. The
fundamental condition can be seen in financial reports and its ratios such as
liquidity, rent ability,
and solvability. The rules of
banking…? In the case of BC, its fundamental data shows that the bank
has had financial problem since it was founded on December 2004.
Another consideration to bail BC
out was that the government believed the bank has a systematic risk to
Indonesian economy. Slovick (2012) proposes a systemically important bank (SIB) theory based on the calculation of equity structure. Some banks are
systemically important if they have
70% of the total assets of the banking industry
in the country, calculated by weighted average of its asset to the national
banking total asset. Consequently the SIBs will also have 70% of the total
equity in that banking industry. In Indonesia the total number of systemically
important banks consists of 15 banks, including private ones and government ones. These are: Mandiri, BRI, BCA, BNI,
Danamon, CIMB Niaga, BII, Panin, Permata, BTN, OCBC NISP, Bukopin, Mega, BTPN,
and UOB Indonesia. According to this theory BC was not a systematically
important bank.
However, it is possible to
consider BC as a bank with a systemic impact. Paul Krugman, the winner of the
economy Nobel Prize says that in the 21st century, the possibility
of economic recession is increased by 50%, if compared to the centuries before
(Prasetyantoko, 2011). The economic crisis in 2008-2009 was defined as an
economic recession because it was short term. Brut to Domestic Product declines
for six months in a row. The signs of recession are an
increasing unemployment level, a stagnant
salary level, and declining retail sales. The World Bank and ASEAN secretary in
2009 claimed that the global economic crisis in 2008-2009 caused a declining
income per capita in countries throughout the world. This abnormal situation
also explained by Widoatmodjo (2010), he
researched about the systemic impact of BC by probit and logit regression to
test investor behavior in BEI (Bursa Efek Indonesia) in the end of 2008. He found that at that time, investors did not behave
rationally. Negative sentiment in the market could be a dominant factor for the
society to rush a bank if BC was closed.
Research gaps emerge because classical
assumption tests through the financial performance theory and the systemically
important bank theory do not meet. To explain this phenomenon this research
uses behavior finance theory, corporate governance, and fraud
theory.
Shleifer and Summers (1990) say
that there are two pillars in the behavior finance theory, which influence the
investor’s decision; limited arbitrage and investor’s psychological bias. These
two pillars determine buy or sell positions of a rational investor when he
senses a mispricing. De Long etal. (1990), continued by Shleifer and Vishny (1997) propose that the risk of a rational
investor is the arbitraged share value. That is; noise traders mislead decision
when a rational investor should always decide on fundamental data. This
distorted attitude happens because of a deviation in the information process
and the limited ability to have the right
information. Similarly, in the case of BC the customers of all the banks
possibly react because of a deviation in the information process and any
negative information can create a bank rush.
Corporate
governance is a concept to enhance corporate performance by monitoring
management performance and accountability based on a set of rules. Corporate
governance builds a structure to aim at certain goals and acts as tools of
performance monitoring (Dharmawati, et.al., 2004). Corporate governance will
reduce agency costs and also improve corporate image and reputation
(Akhtaruddin, Hossain, Hossain, and Yao, 2009). Corporate governance in banking
is even more important because of some considerations. First, the bank has a
dominant position as an economy growth machine (King and Levine, 1993). Second,
in a country with an undeveloped equity market, a bank is the main institution
of lending. Third, a bank is the prime institution to national saving
mobilization. Fourth, bank liberalization by privatization and economy
deregulation gives the bank’s manager broader power to operate a bank.
Banking
as an institution has a specific nature, which is different from non financial
institutions (Macey and O’Hara in Supriyatno, 2006). The uniqueness of this
nature blends with the situation of the Asian financial crisis; leads this research to corporate
governance problems (Arun and Turner in Supriyatno, 2006).
The countries with deficiency in practicing corporate governance suffered most
in 1997 to 1998 (Husnan, 2001). The application of corporate governance can be
seen in the audited financial report of a company. Financial report is a tool
for a company to inform about its condition to its stakeholders. This
information has to meet quantitative and qualitative standards (fundamental
concept of financial report). Information should be focused on the general
needs of its stakeholders, not to cater to certain individual benefit. When a
financial report is arranged for a certain need and want of a party it will
create fraud risks, the report does not inform about the true condition of the
company and it causes loss to the other parties. Gravitt (2006) and Nguyen
(2008) say that fraud in financial reports has certain schemes: 1.) falsifying,
changing, or manipulating financial material facts, supporting documents, or
business transactions. 2.) Intentional negligence or misrepresentation of
events, transactions, accounts, or other important information.3.) Intentional
misuse of accounting principles or procedures to measure, to disclose, and to
report economical events and business transactions. 4.) Intentional negligence
in disclosure or improper disclosure representation.
To
understand how a fraud causes loss, we need to define what fraud is. According
to Badan Pemeriksa Keuangan (BPK)-Supreme Audit Board (2008) the definition of
fraud is: misinterpretation of past and present, of material facts, made
knowingly or recklessly, intended to make a party act, and the party suffers a
detriment because of the misinterpretation.
ACFE mentions three types of fraud: a) Asset misappropriation: misuse or
stealing of a company’s assets. This type is tangible and the value of the loss
is able to be defined. b) Fraudulent statements: financial arrangements in a
financial report to benefit illegally. c) Corruption: included in corruption
are conflicts of interest, bribery, illegal gratitude, and economic extortion.
The link
between corporate governance and fraud can be explained as follows: a.)
Corporate governance includes company culture and authorization delegation, and is designed to eliminate fraud. b.)
Transaction level control process by an internal auditor is a control and
preventive process to ensure that only legitimate transactions takes place in
the system. c.) Retrospective examination by an external
auditor is aimed to detect fraud before it becomes big and dangerous for the
company. d.) Investigation and remedial by a forensic audit to determine
remedial acts related to size or depth of fraud. Tiscini and Donato (2004)
propose that relating to CG and fraud in private and Government Companies,
accounting fraud tends to be caused by excessive power, while in a public company
accounting fraud tends to be caused by performance stress. Hambrik and
Mason (2004), proposes in upper-echelon
theory that the role of a TMT (Top Management Team) is a crucial issue of
company performance. Top Management Team (TMT) can be an elite team of the
management, or can include one or more of the owners, or a majority share
holder. Finkelstein and Hambrick (1984) found that the TMT has
more power than the management. In other words, the TMT has strong influence on
strategic implementation, operational decisions, internal innovation processes.
The TMT has such a power that it can create major fraud to benefit illegally at
the cost of other stakeholders.
In case
of BC, the role of TMT by dominant shareholder (Robert Tantular (RT) strongly
influenced strategic decisions. Thus, to analyze the bank’s internal problem by
corporate governance and fraud, it is also important to analyze the role of the
TMT.
The main
question of this research is, considering all those facts; did the failure of
BC have a systemic impact on the Indonesian banking system? Systemic means that
it affects the entire organs of a banking industry. According to the government
regulation about the Jaring Pengaman System Keuangan, Social Safety Net System
(JPSK) or Peraturan Pemerintah Pengganti Undang-undang Jaring Pengaman
Stabilitas keuangan (PERPPU JPSK), systemic impact is:
‘… a difficult condition caused by a
bank, non bank financial institution, and/or financial market turbulence, which
when it is not handled properly will cause failure to a number of banks and/or
non bank financial institutions, and the people will lose trust into the financial system and the national economy.’
In PERPPU
JPSK the criteria and size of a bank with systemic impact is not clearly
defined. The nature of systemic impact can be internally or externally.
Internally means the problem
develops from inside a bank, such as non-prudential acts, while an external
cause could be a natural disaster, a global financial crisis, or a war. Thus,
in such cases it is difficult to demarcate the systemic impact of the bank. A
financial institution can be systemic in certain situations, but not systemic
in other situations. The indicator of systemic is also not mentioned explicitly
in any law code, the reason is that it would cause moral hazards and that the
criteria of systemic impact are situational depends on psychological market.
The Bank
of Indonesia adopts the European Union Memorandum of Understanding (MOU)
Framework, which says that the consideration of a systemic impact has multiple
aspects: financial system, financial market, payment system, real sector, and
market psychological aspect. The market psychological aspect is added to the
criteria in relation to the economic crisis in 1998. At that time, the closure
of 16 banks, which had only 2.3%
of the banking total assets, psychologically affected the financial market. It
ended up with savings withdrawals in all national banks and caused a crisis in
various sectors. Further, in the era of cyber dimension, cyber gossips
(Wysocki, 1998) magnify the irrational behavior of investors through various
rumors spreads in the internet.
Another
important factor to consider in economic decision making is Risk. As Admati
says (2013);
‘… When policymakers ignore risk, all of
us may suffer in the end. A stark example was provided in Japan, where
corrupted regulators and politicians colluded for years with the Tokyo Electric
Power Company and ignored known safety concerns. When the earthquake and the
tsunami happenned
in 2011, this neglect led to a nuclear disaster that was entirely preventable…’
Admati
(2013) proposes that a banking system is not difficult to understand, that all
issues will move quite straightforward if it is all purely a banking consideration, without any conflict of interest from
the politicians. Admati (2013:200) also says that the banks ‘are where the
money is’. Money is the main goal and source of power. To control the money,
bankers are in a strong position to influence the society together with
politicians and government regulations. History shows that politicians have
often used banks as money machines in political interests. The phenomena of politicians, regulators, and monetary
authority having various interests in making a regulation for banking, is known
as ‘regulatory capture’. These actors create a Political Arena in the banking
system. Together,
they create a situation to achieve various interests while they are ‘securing
national financial stabilization’. As an example, the regulation of minimum percentage
of reserve requirements tends to get higher during a financial crisis. Besides
the noble purpose of securing the trustworthiness of the banks, this regulation
gives a chance to the government to get free loans from the central bank,
because the reserve requirement is indirectly financing the government. Even
though the regulation captures are not always being negative, we also need to
consider the grabbing hand or helping hand theory, which says that government
intervention used to be laden in corrupted interests when the intervention has
neither transparency nor accountability in the process (Hopkin and Pose, 2007).
The regulators of banking industry should analyzes three main layers to build a
healthy intervention decision: market failure, corporate governance failure,
and regulation failure of the Central Bank.
This
research does not discuss whether bank rush, nor capital flight, would happen
if BC have been closed in 1998, but it approaches the problem of bailouts from
multidisciplinary points of view: government-politics-economy. Seligman (1962: 345) proposes that the political factor
needs to be related to economic and social changes in the society. Heilbroner
(1977) proposes that if the economic science wants to keep relevant to modern
problems, the science has to keep in pace with three areas of concern:
political consideration need to be explicitly included in economic decisions,
the political dimension needs to be broadened in economic decisions, and the knowledge needs a broader paradigm. Ilchman and
Uphoff (1977) propose that economic decisions need to go through integrated
social science of public purpose. In short, economic decision making needs to
be approached multidisciplinary and to consider all relevant interests in
social and political perspective.
3.0 Methodology
As a
sample, this research takes BC, which operated from 2004 to 2008
along with its subsequent event data, supporting data from the Central Bank of
Indonesia, depositor insurance’s data, and all related data from various
institutions in 2004-2008.
This
research uses the time series method in an interpretative case study. The
subjects are: executive officers of BC in 2004-2008, the owners of the bank
Robert Tantular (RT) and Rafat Ali Rizvi (RAR), the former Vice President of
the Republic of Indonesia (JK), the former Government of Bank Indonesia (BO),
the former Ministry of Finance of the Republic of Indonesia (SMI), special
investigation team or Panitia Khusus (Pansus) of BC, Badan Reserse Kriminal
(Bareskrim) Kepolisian Republik Indonesia, Badan Pemeriksa Keuangan (BPK) RI,
officers of Lembaga Penjamin Simpanan (LPS) , officers of Komisi Pemberantasan
Korupsi (KPK), former officers of BC and all related institutions. One of the
researchers is ex-director of PT Bank CIC (one of the banks which formed the
BC) from 1998 to 2001. Information are taken by interviews/letter/e-mail, in-depth analysis and direct observation
from 2010 to 2014. Primary data are taken by interviewing former decision makers in the bailout and former officers of BC. the researchers
interview the former Vice President of the Republic of Indonesia (JK) face to
face and interview the former Government of Bank Indonesia (BO) by letter and
email. Secondary data are taken from
the PT.Bank Century annual reports from 2004 to 2008, the investigation
report of the Indonesian Central Bank, the audit report of BPK, the report of
Pansus (DPR) of BC and all the supporting data. Press releases through
television and newspaper reports are also analyzed to enrich the in-depth
analysis. Berita acara pemeriksaan pidana inggrisnya apa?
Triangulation
system does data observation. Primary data are grouped in peer debriefing.
Secondary data are grouped and used to check subjects’ opinions. Bias is
minimized by triangular model based on the content analysis of primary and
secondary data. Adjustment theory of before end theory and after end theory is
also used to minimize bias. The case of BC is chosen because of it is a
national issue in Indonesian banking. The scale and complexity of the case are
massive and logical. The case can be accessed by available sources, within a
certain time limit. These considerations make the case both worthy and feasible
to be observed.
4.0
Finding and discussion
Considering
internal problems of BC since 2005, was it worthy to be bailed out, and was the
amount to bailout appropriate? Time series data of the financial report shows
that foreign exchange securities, acceptance liability, and non performing loan
made BC needs a very large amount of PPAP. Inability to meet the standard
amount of PPAP made its CAR always
fewer than 8%. Detail calculation of CAR also shows that the appropriate amount
to bail out was Rp 5,724.541 million. Regarding the internal condition of BC it
was not worthy to bail out BC.
The
financial report of BC shows that problem of corporate government and fraud in
BC was very complex. It was not wise to bail it out as its default was not
caused by financial crisis, but by weak governance, imprudent banking, and
owner’s fraud. Considering corporate governance theory, it was inappropriate to
bail out BC. To bail out BC was to bail out any fraud caused by a dominant
shareholder and his management, as if the bailout was to cater to certain
party’s interests. Macro economically, the decision was taken to keep national
banking stabile and to build banking trustworthiness during the global crisis.
This is in accordance with Budiono (2008) who states that government
intervention was needed to avoid a domino effect because of BC’s bankruptcy.
Darmin Nasution (2008) also states that government temporary equity is needed
to rescue the bank. Another important finding is that the amount to bail out
was excessive and was used inappropriately. There were other interests rather
than merely keeping national banking stabile and building banking
trustworthiness. The decision of bailout shows that political interests have
higher priority than other normative criteria. The decision to bailout was
viewed in a macro politic context in the multi interests of the decision
makers. There was a strong connection between political and economical factors.
Failure to understand this big picture will create a narrow-minded financial or
banking science
Was the
decision to bail out relevant to national banking stabilization? FPJP USD 1
Billions was aimed to pay deposit obligation (BS) in Surabaya branch. Bail out
was given gradually, aimed to back up massive withdrawals. The reason was that
in financial/economic crisis, the government believed that closing any bank will
cause systematic domino effect. However, the decision to bail out was able to
maintain not only the national banking stability but also the stability of the
political situation. The timing was very
close to the presidential and legislative election in early 2009. Considering
the timing, to maintain national banking stability and trustworthiness mean
maintain politic stability. An election is a door to big change; it is wanted
or unwanted by some actors in the political arena. Consequently, many decisions
will consider various interests of the actors. The decision to bail out BC was
one of these decisions. As a matter of fact, the Indonesian economic indicators
improved after the government bailed BC out. Another fact was that the
president at that time (SBY) was then elected to his second presidential term.
Was the
failure of BC in 2008 a symptom of market failure, or a governance failure of
BC and a regulation failure of the Indonesian Central Bank? The complicated
frauds in BC made it failed to pay its obligations at the end of 2008. It was
not a market failure, but a corporate governance failure and an Indonesian
Central Bank Regulation failure caused by asymmetry information about BC’s
internal condition. Market failure was only a trigger to BC’s default. BC
failed to pay its obligation when a depositor withdrew his savings. The
Indonesian Central Bank failed to analyze the banking system problems when it
assumed that this default would systematically affect the national banking
stability.
The case
of BC began with liquidity problems when a depositor wanted to draw back his
money. BC could not pay its obligation because of its illiquid investment in
non rating, unmarketable securities. Meanwhile, BC did not keep its reserve
requirement on the 12% level as it should have. The finance behavior theory was
used when the government considered that the world was facing a global
financial crisis and believed that if BC was closed, it would cause systemic
impact. Considering there was also rumor of negative market sentiments, a
closure of a bank would have affected government credibility, and all the
individual investors would have lost their trust in the banking system. At such
times, when the legislative and presidential election was very close, this was
dangerous for the national stability. At this point,
the government of Indonesia decided to settle the liquidity mismatch of this
bank. Whether or not BC followed the regulation of the Indonesian Central Bank
in accordance with basic rules of the Indonesian Banking Architecture was not
being considered in the decision. Frauds that had happened inside the bank were
given even broader scope by the big amount of money injected right into the
bank. It was a failure to analyze banking system problems. Corporate governance
failure was detected as a market failure, in turn, it caused a
regulation failure. At that time of the crisis, the multi interests of bankers,
politicians, and regulators has created a situation that politically
constituted the bailout.
Conclusion
Related to economical and non-economic aspects there are
some conclusions. BC was a systematically risk bank, and it was bailed out
because of noneconomic reasons. According to the theoretical observation and
its implications, the bailout of BC was dominated by non-economical reasons.
There was a financial global crisis, and the nation was on the verge of
legislative and presidential elections. The bail-out of BC by KSSK was aimed to
stabilize the macro-economic and financial sector by using a certain amount of
funds from LPS to guarantee more than USD 6,7 Billion depository funds in the
Indonesian banking system (Sri Mulyani,2009). This decision was taken from
benefit-loss analysis. In turn, this decision would prevent a domino effect of
bank rush (Budiono, 2013). The timing created a political, economic decision to
bailout. This research defines it as ‘too politically significant to fail’.
To rescue a bank, accountability and transparency in the
cash management is needed. So it is better to avoid a cash bailout that tends
to cause a conflict of interest. The bail-out technique is not appropriate to
rescued BC from bankruptcy. A more effective tool is needed to rescue the bank.
The researcher proposes a recapitulation procedure by obligation recapitulation
as an additional working capital for the bank to avoid conflict of interest and
political effects. This additional working capital could be obtained by
overbooking depository premium funds of LPS in other banks, and transferred to
the rescued bank either as loan or as time deposit. This alternative would have
solved the liquidity problem, which means it would have been able to redeem
market volatility. In turn this would have won back the banking system’s
trustworthiness. This alternative would have been more transparent and
accountable because the depository premium funds of LPS would have been recorded
in detail in the bank, and the fund would have gained some revenue of interest
for the government. This alternative
would also have avoided the polemic of a corrupted use of fund.
This suggestion can be applied to guide the decision makers
if they face a situation ‘too politically significant to fail’, ceteris
paribus.
Finally, Future research needs to analyze the process of a
bank takeover. Does the consideration of a negative track record of the
shareholders influence the government to take it over? There was much conflict
of interest in private banks, and this phenomenon keeps going on. The audit
inspectors of BI are still having trouble with some owners of the bank. Future
research also needs to investigate why bailouts mostly happen close to legislative/presidential
election. Is there any other reason rather than an economic motive to rescue a
bank?
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Appendix: Glossary
BareskrimPolri (BadanResersedanKriminalKepolisianRepublik
Indonesia) is the Institution under Head of Police Republic Indonesia that
doing inspections and investigate the crime in the public.
BI (Bank Indonesia) is the Central Bank of republic Indonesia.
BPK RI (BadanPemeriksaKeuanganRepublik Indonesia) is the
auditor that doing on behalf of the Government.
KPK (KomisiPemberantasanKorupsi) is the Institutions in
Indonesia that investigate the corruptions.
KSSK (KomiteStabilitasSektorKeuangan) is the steering
comittee of Republic Indonesia had job for stability of macro-economic and
finance sector of the nations.
LPS (LembagaPenjaminSimpanan) is the Government Institutions
in Indonesia that doing as guarantor of the savings and deposits in the banks
up to the amount has appointed by Central Bank regulations.
PMS (Penyertaan Modal Sementara) is the bail-out of the bank
by government or is like penyertaan equity from the government to the private
bank had acquired.
