Bank owners’ conflict of interest
The practice of providing credit access by giving kickbacks (bribes) to banking owners and officers is a violation of the law that OJK should prosecute. If the perpetrator is a bank officer or employee, the culprit must be punished according to the law.
If the perpetrator is the bank owner, the institution should be closely scrutinized. Learning from the past, the cause of the 1998 banking crisis was in part that bank owners lined their own pockets by granting loans improperly. Thus, much credit went bad because of reckless loan provision, eventually crashing the banking system.
Investigate all parties involved, including Mayapada Bank’s owner
Mayapada Bank’s owner, Dato Sri Tahir, must be immediately interrogated by OJK to ascertain whether any fraud is involved. OJK must not be afraid or hesitate, even though Tahir is a member of the Presidential Advisory Council. Rules are rules.
OJK must also remain vigilant because fraudulent practices from internal financial institutions often occur, such as in the cases of Minna Padi Aset, Wanaartha Life, Pan Pacific Insurance, Kresna Life, Jiwasraya, Asabri, Bumiputera, IndoSurya, Bukopin and, recently, Mayapada.
Read: Confusing signals on interest rate policy from Central Banks
OJK also needs to improve its bank supervision as fraudulent practices such as these involve a network of not only creditors and debtors but also corrupt officers in OJK itself.