Non-Performing Loans in State-Owned Banks: Corruption or Business Risk?

 
Fitri Novia Heriani, Andin Aditya Rahman
 
Government officials and academics continue to debate the various interpretations regarding non-performing loans (“NPLs”) in state-owned and regional-owned banks. The main debate is whether or not such NPLs should be categorized as corruption. This debate arises due to the vague definition of “state finances” under Indonesian laws and regulations.
 
D. Andhi Nirwanto, Deputy Attorney General, argues that the definition of state funds that is applied to state-owned and regional-owned banks is based on Law No. 31 of 1999on the Eradication of Corruption Crimes, as amended by Law No. 20 of 2001, even though it should be considered on a case-by-case basis.
 
“Also consider the business judgment rule doctrine, which is provided for under Articles 92 and 97 of Law No. 40 of 2007on Limited Liability Companies,” Mr. Nirwanto said during a national seminar held in Jakarta on Wednesday.
 
Nevertheless, Mr. Nirwanto deplores the frequent abuse by board of directors at state-owned banks of this business judgment rule doctrine, such as the implementation of good corporate governance (GCG), used to avoid business risk lawsuits and corruption indictments.
 
“The business judgment rule is there to protect the bank’s board of directors. Today, GCG has become the key word for banks’ board of directors in avoiding lawsuits stemming from business risks,” explained Mr. Nirwanto.
 
If this misunderstanding of the doctrine continues to broaden and encompass what is actually  corruption, entrepreneurs and board of directors will be able to unfairly avoid indictments.
 
“This will rip the public’s sense of justice to shreds,” Mr. Nirwanto emphasizes.
 
Yunus Husein, a banking law lecturer at Faculty of Law at the University of Indonesia, also asserted similar sentiments to those mentioned by Mr. Nirwanto.
 
According to Mr. Husein, NPLs in state-owned and regional-owned banks cannot be absolutely classified as corruption. This is primarily because NPLs are caused by a number of factors, such as debtor circumstances, general performance of the bank in question, and macro-economic conditions.
 
“In determining whether a corruption act occurred or not in relation to NPLs of state-owned enterprises, considerations must be made to what caused the case,” explained Mr. Husein.
 
Mr. Husein, however, admitted that non-performing loans in government-owned banks can be classified as corruption if the underlying criminal act is proven. If it is merely caused by associated business risks, then it must be handled in accordance with prevailing company laws.
 
Laica Marzuki, former Supreme Court Justice, also shared his insights on this matter. He asserts that state-owned and regional-owned banks are limited liability companies with government capital that are separate from the state budget. Therefore, every business act, including the management of debts and receivables, are carried out on the bank’s own accord.
 
“This means that they cannot be transferred to the State Receivables Affairs Committee,” concluded Mr. Marzuki.
 
(hot/kc)