Aditya Suharmoko, Jakarta – The central bank and the Finance Ministry have refused to take blame for the compromised supervision of foreign banks operating in Indonesia, following hefty losses suffered by local investors after buying into products offered by the banks.
The investments turned sour after US financial services giant Lehman Brothers Holdings Inc. collapsed last week, sending both institutional and individual investors with portfolios exposed to Lehman reeling from losses.
Bank Indonesia spokeswoman Dyah Makhijani on Monday told The Jakarta Post if the investors spent their money in offshore investment products, neither BI nor the Capital Market Supervisory Agency (Bapepam-LK) could take any responsibility.
"We do not oversee any foreign investment products, although they are offered by banks," she said.
In addition to managing monetary affairs, BI is also tasked with supervising local and foreign banks operating in the country.
However, Dyah said she could not comment further until she learned about the agreements between the banks and the investors.
She also refused to explain which institutions were responsible for issuing licenses for the foreign banks to sell such investment products, which eventually could not be safely certified by the authorities.
Dozens of investors flocked to Citibank Indonesia's Pondok Indah branch in South Jakarta last week to seek explanations over a massive probable loss in their investment with the Citigold wealth management banking program, following the Lehman bankruptcy.
The product is exposed to Lehman notes, which are linked to the performance of the Hang Seng China Enterprises Index, Korean KOSPI 200 Index and the Tokyo Stock Exchange REIT.
Most affected investors, from the middle to upper-income bracket, were offered lucrative investment products by the banks' wealth management divisions under complicated contracts.
Citibank Indonesia said it would only comment on the issue on Tuesday. The Citibank investment trouble is just the tip of the iceberg, with several foreign banks operating in Indonesia expected to keep the problem under wraps for fear of doing damage to their credibility.
The Indonesian unit of UK-based Standard Chartered admitted there were several local investors whose investments had been exposed to Lehman assets. However, the bank refused to disclose whether they suffered any losses.
Finance Minister Sri Mulyani Indrawati told the Post the investment woes were the responsibility of the central bank as the watchdog of foreign banks operating here. "BI should be questioned over the issue. It supervises the banks," she said.
The ministry's Bapepam-LK bureau head of legal and regulatory affairs, Robinson Simbolon, said the agency could only take action if the investment products were certified by the agency.
"If they are issued by banks, BI should take the blame. If they are issued by securities houses, then we are the ones who'll get toasted," he said. "But if the investment products are basically not Indonesian products, it is not our job to protect the investors."
A source at Bapepam-LK said the agency had a few years ago attempted to supervise the investment products offered by the foreign banks. However, he said the banks refused to comply, saying BI was the only institution authorized to do the job.