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Citibank 'not responsible for losses of investors'
Citibank Indonesia refuses to take any blame for losses suffered by local investors following the collapse of U
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Citibank Indonesia refuses to take any blame for losses suffered by local investors following the collapse of U.S. financial giant Lehman Brothers, but promises to help them secure what is left of their money.
On Tuesday, Citibank country officer for Indonesia Shariq Mukhtar said the bank acted only as a selling agent for the notes issued by Lehman, then an A+ grade investment institution, and therefore could not guarantee any investment losses.
"This has been an unprecedented event and, of course, was not predictable. It happened so fast; so when we found out, we told customers immediately," Mukhtar said, adding Citibank did not have the chance to give investors an earlier warning.
"We have established a team in the region... to help investors execute their rights against Lehman," he added.
Dozens of investors flocked to Citibank'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.
Lehman, previously the fourth largest financial institution in the U.S., filed for the biggest bankruptcy in U.S. history last week.
Most affected Indonesian investors, from the middle to upper-income bracket, were offered lucrative investment products by several banks' wealth management divisions, with a minimum investment of between US$50,000 and $60,000, but under complicated contracts.
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.
Citibank managing director Tigor M. Siahaan said the bank had been trying to sell Lehman's principal protected notes to secure investors' money despite a drop in the prices.
"If there is liquidity, we will try to help. But the markets will determine the price," Tigor said, adding no parties were interested in buying the notes so far.
Citibank refused to mention the amount of losses local investors had incurred.
Mukhtar claimed the selling of Lehman's notes in Indonesia did not require a permit from the central bank or the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK).
Bank Indonesia and Bapepam-LK earlier said they could not take any measures to help investors because the notes were from offshore investment products.
A copy of an agreement between Citibank and an investor, obtained by The Jakarta Post, underlines the notes are not bank deposits and are thus not guaranteed by the Indonesian government, the Indonesian Deposit Insurance Corporation, Bapepam-LK, BI, the U.S. Federal Deposit Insurance Corporation or Citibank.
The agreement also says the notes are subject to investment risks, including possible loss of the principal amount invested.
