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Bank Dagang Bali Closed by Government

Bali-Owned Bank Declared Insolvent by Bank Indonesia.

Bali News:
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On Thursday, April 8, 2004, Bank Indonesia formally withdrew the operating licenses of PT Bank Dagang Bali (BDB) and PT Bank Asiatic. Both banks are now in the process of liquidation after having failed to meet minimal liquidity ratios and other requirements established by the Government.

According to Bank Indonesia officials, the closure of the two banks was the "final step" after the directors and shareholders of the two banks failed to heed official warnings to shore-up their ailing balance sheets. The owners and directors of the banks were reportedly asked by Bank Indonesia to increase the capitalization of the banks, enhance the quality of their productive assets, resolve various credit transactions deemed to be fictive in nature, and replace its current directors.

BDB's closure is apparently the final chapter in the banking saga of a local business legend, Mr. I Gusti Made Oka, who labored over 5 decades to create a bank that initially got its start via small personal loans made by Oka, then a local tailor, to business associates. When the son of BDB's Oka's, married the daughter of Mr. Tong Muk Keung, the Owner of PT Bank Asiatic, a series of financial transactions commenced between the two banks that eventually led to the official closure. BDB loaned funds to PT Bank Asiatic in the form of Negotiable Certificates of Deposit that exceeded the maximum amounts allowed in inter-bank loans.

Local press reports indicate that depositors at both banks will have their funds guaranteed under a special provisionary account set up for that purpose by Bank Indonesia. According to reports in the Indonesian-language Bisnis Indonesia the Government will have to meet obligations amounting to Rp. 2.39 trillion (approximately US$ 281.2 million).

BDB operates 31 offices employing 632 employees. Meanwhile, Bank Asiatic has only 150 employees working from 16 offices.

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