RETAIL BANKING | Cesar Tordesillas, Indonesia

Indonesian bank owners blamed for industry failure

Bank owners are the biggest culprits.

This is the assertion of the Deposit Insurance Agency (LPS) regarding bank fraud, which is causing the failure of banking business in Indonesia.

"In our observation in the past seven years after LPS came on line all bank scandals have been traced back to frauds," said LPS Commissioner C. Heru Budiargo.

He insists that strict and firm disciplinary control by the regulator is needed to prevent frauds.

However, there are much fewer cases of banking failure at present compared with a decade earlier, he said.

LPS has been given control of Bank Mutiara, formerly known as Bank Century, which is in the center of high profile controversy involving high ranking government officials.

In the wake of the 2009 global financial crisis, Bank Century was robbed by its owners who fled abroad and the government triggered the controversy by bailing out the lender with Rp6.7 trillion.

The Bank Century case is now being investigated by the Corruption Eradication Commission.

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