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Bank J Trust Indonesia | The Ongoing Dispute Regarding Antaboga and Mutiara Bank

In the aftermath of the Bank Century case, the dispute regarding the responsibility of Mutiara Bank to pay compensation to Antaboga’s investors continues to divide opinion among the public, regulators and banking industry. The case involves hundreds of retail investors who bought fraudulent investment products from PT Antaboga Delta Sekuritas through Bank Century. A Supreme Court ruling in June 2012 obligates Mutiara Bank to pay compensation to 27 investors in Central Java plus penalties stating that the bank had failed to protect its clients under the Consumer Protection Law and was therefore liable for the lost investment despite the bank now being under new ownership.

Observers of Indonesia’s financial industry and the regulatory environment have been quick to point out that legally, Antaboga investors were not direct clients of Bank Century (now Mutiara Bank) evidenced by the fact that they were not recorded on the balance sheet of the bank. As Mutiara Bank remains under the jurisdiction of the Deposit Insurance Corporation (LPS), the bank would actually face a penalty in the event that it paid compensation to Antaboga customers as LPS funds are strictly earmarked for banking customers and not external clients.

Mahendradatta, a renowned legal advocate on financial regulations in Indonesia and the bank’s attorney, has voiced his concerns on how the Supreme Court ruling could impact the Mutiara Bank and that customers could potentially sue the bank as funds to pay the compensation would be derived from bank customers’ premiums. He went on to stress that such payments would be tantamount to legalised corruption. In addition, the losses suffered by investors due to the purchase of Antaboga investment products were done so when the bank was under the ownership of Robert Tantular and that as the bank is now 99.9% owned by the LPS, the Supreme Court decision cannot be executed. This dilemma is also being grappled with by law makers within the House of Representative who wish to see investors compensated but recognise the legal conflicts surrounding the decision.

Mutiara Bank is therefore assessing its options in appealing against the ruling in the form of a ‘case review’, yet remains committed to uphold the law and the decision of the Supreme Court. While this represents a challenge for the bank, it does also provide a degree of legal certainty in future cases surrounding Antaboga investors for potential buyers of the bank. The ruling also does not detract from Mutiara Bank’s continually improving financial performance and bolstered capital base since the 2008 bailout. The bank’s future plans such as its entry into micro lending at the end of 2012 with the opening of 50 dedicated branches have caught the attention of several serious investors who have submitted their documentation to the LPS with the view of acquiring the bank.