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Bank Danamon ready to face EKN lawsuit over derivatives
Bank Danamon, the country's fifth largest lender, is ready to face a lawsuit filed by one its customers over derivative contracts, but at the same time the lender is still seeking for an out-of-court settlement, the bank's lawyer says
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ank Danamon, the country's fifth largest lender, is ready to face a lawsuit filed by one its customers over derivative contracts, but at the same time the lender is still seeking for an out-of-court settlement, the bank's lawyer says.
Ricardo Simanjuntak told The Jakarta Post Thursday the bank was prepared to challenge local paper producer PT Esa Kertas Nusantara (EKN) in court because the bank had sufficient supporting evidence in the form of contracts.
He said the contracts revealed EKN had approved the agreement and understand well the risks.
"The products have been well-explained *by Danamon*. EKN has been aware of the risks," he said.
"We don't have any knowledge of their reason for failing to understand the products. Danamon has met all the criteria required for providing such transactions."
EKN financial advisor, PT Independent Research and Advisory Indonesia (IRAI), announced Tuesday the EKN decision to file a law suit against Danamon with the South Jakarta District Court seeking Rp 1 trillion (US$84 million) in damages.
IRAI was founded by senior capital market analyst Lin Che Wei.
According to IRAI advisor Chengwy Karlam, EKN had accused the bank of selling misleading derivative products aimed at speculative gains rather than for hedging purposes.
Ricardo dismissed the allegations, saying the products were aimed at hedging protection especially for exporting companies as mentioned in the contracts.
He said Danamon was willing to comprehensively explain about the product once again and to settle the case amicably.
"But it takes two to tango with EKN."
EKN is a company which produces and exports coated and uncoated paper. It is based in Jakarta and Karawang, West Java, employing around 1,200 workers.
Bank Indonesia (BI) issued a regulation in December banning banks from selling derivative transactions related to speculation deals.
BI deputy governor Budi Mulya has said 15 banks have sold up to $4 billion of derivative products before the December ban came into affect. These products will mature in the second half of this year.
