By Eko B. Supriyanto, Editor-in-Chief of Infobank
The former directors of regional development banks (BPD) must be wondering what they are dreaming about. Already retired, they are suddenly named suspects for approving loans five years ago. Their retirement must be spent in a “prodeo” hotel. Their reputations, built over their careers, are gone, and everything else is lost as well. This is what former directors of three regional banks—Bank DKI (now Bank Jakarta), Bank BJB, and Bank Jateng—are now experiencing. It could happen to other regional banks with different cases. Currently, anything is possible. In fact, it is now causing fear among all bankers.
The designation of these regional bankers sends a bad signal to other bankers. If regional banks grant loans that later default, it is deemed detrimental to the state. The question is: what if private and foreign bankers grant loans to state-owned enterprises that later default? At present, this is also very frightening for bankers. The designation of BPD bankers as suspects is a bad signal for the banking sector, which is currently experiencing a “slump” in credit.
The suspects, some of whom are professional bankers from Bank Mandiri, according to the Director of Investigations at the Attorney General’s Office for Special Crimes (Jampidsus), Nurcahyo Jungkung Madyo, colluded in granting loans to PT Sri Rejeki Isman Tbk (Sritex). However, he said, Sritex was not eligible for financing.
The actions of the “suspects” are considered to have caused losses to the state amounting to Rp1.08 trillion. “The state losses from the provision of credit to these three banks are approximately Rp1,088,650,808,028, which is currently still being calculated by the Indonesian Audit Board (BPK RI),” said Nurcahyo.
By 2020, who wouldn’t be interested in Sritex, which had been “flooded” with loans from many reputable banks. Its total loans reached Rp25.1 trillion from 28 banks. Not only Bank DKI, Bank BJB, and Bank Jateng, but also 25 other creditors. Now, Sritex’s success story is just a memory. Previously, who wouldn’t want to finance Sritex, which had gone public and become a key player in the textile industry and its derivatives?
In 2020, according to Sritex’s financial report, total assets reached Rp27.37 trillion with total liabilities of Rp21.89 trillion. Shareholders’ equity stood at Rp5.47 trillion. Therefore, the claim that liabilities exceeded assets in 2020 is inaccurate. The debt-to-asset ratio remained at 80 percent. Despite the high debt levels, the company still maintained positive equity (Rp5.47 trillion). In 2020, it was still creditworthy.
However, in 2022-2023, conditions worsened due to an increase in debt and a decrease in assets, resulting in negative equity in 2023. Sritex also fell into a debt trap, especially during the difficult times of COVID-19, which worsened its financial condition. Eventually, it entered into a Debt Payment Moratorium (PKPU) and ended up bankrupt. And then disaster struck. Layoffs were unavoidable, and investigations began.
So, when the BPD bankers granted the loan, PT. Sritex was still creditworthy with adequate profits. Who could have known that the situation would deteriorate a year or two later? It wasn’t the fault of those who granted the loan. And it was beyond the control of the lenders in this case, the three BPDs. It’s like losing your wallet at the market. You report it to security, but instead of helping, they blame you. “You knew there were pickpockets at the market, why weren’t you more careful?” In reality, the pickpockets should be caught, not the wallet owner blamed for being careless. The three banks lost money, not intentionally. That’s business judgment.
The fate of becoming a BPD banker requires exceptional abilities. To date, BPDs have consistently been disrupted by their shareholders, namely local governments through their regents and governors. The BPD board of directors is indeed a hot seat. A change in regional leadership results in a change in the board of directors, regardless of whether the financial performance is strong or weak. Not only that. Interference also arises from the Ministry of Home Affairs through Government Regulation No. 54 of 2017, which makes it difficult for BPD to operate, even though it is already under supervision by the OJK and BI.
Now, regarding credit approvals, as experienced by the former directors of Bank DKI, Bank BJB, and Bank Jateng, when their loans defaulted, they were accused of causing losses to the state. Even more alarming, they were accused of “conspiring.” However, upon examining the case, it appears that Sritex defaulted due to a decline in revenue, caused by a slump in the export market resulting from the COVID-19 pandemic and the Russia-Ukraine war, which disrupted global markets and deviated from Sritex’s business plans.
Thus, loans became “stuck” and defaulted at many banks, including the three banks where the directors and officials (seven bankers) are now suspects. This is akin to the BPD funds used by Sritex under Sritex’s control, yet the bank that provided the loan is being blamed. This is a major question for other BPD bankers. However, once a loan defaults, anything can be blamed. Simply stating “violating the principle of prudence” is sufficient.
Since the appointment of the former banker from the three regional development banks, fear has spread among many bankers, including private, foreign, and of course Himbara bankers. If the three regional development bankers gave credit to Sritex (private), what if the debtor is a state-owned enterprise that defaults? That is what makes all bankers afraid if one day their credit defaults. It’s terrifying. We must ensure that, should a state-owned enterprise default, private or foreign banks are not accused of complicity in causing losses to the state.
After all, not all loan defaults are the fault of bankers. The Sritex loan default case was primarily due to the borrower, not the banker. Naturally, the appointment of BPD bankers accused of causing losses to the state has a negative impact on loan disbursement. It is possible that BPD bankers will re-evaluate their lending to corporations. They may instead opt for safer sectors, such as employee loans. Or, if they have excess funds, they might prefer to invest in Government Securities (SBN) with attractive yields. Or enjoy Bank Indonesia Securities or Bank Indonesia Rupiah Securities (SRBI).
Who would have thought that a company that is currently performing well would collapse five years later? It went viral. And, if there is credit from BPD, then the banker could become a suspect even after retirement. If bankers from Himbara are protected by the State-Owned Enterprises Law, which states that non-performing loans are not considered a loss to the state, then it is time for this protection to also apply to bankers from BPD. Granting loans is a business judgment as long as there is no bribery, fund transfers, or any form of improper payment.
Be careful! Approving a loan that later becomes non-performing could result in being accused of causing a loss to the state. This can happen to anyone. This is a bad signal for the banking world. Especially for bankers from the 27 BPDs across Indonesia. Hence, a banker joked, “All BPD bankers will go to heaven when they die, because their lives were like hell.”
Not all non-performing loans are the bankers’ fault. And not all non-performing loans result in state losses. (*)
