Indonesia watchdog cautions on excess bank withdrawals, to investigate social media

JAKARTA (Reuters) - Indonesia's financial watchdog on Wednesday urged customers not to withdraw excess cash from banks while it and the police investigate "irresponsible" social media posts about mid-sized Bank Bukopin.

The Financial Services Authority (OJK) said viral social media videos urging customers to withdraw money from the bank would be investigated.

The OJK called on customers to avoid excess withdrawals from all banks and regarding Bukopin said they should "remain calm and do not withdraw above a fair amount as that would affect the bank's condition greatly".

It said the banking sector on aggregate was well capitalised and its liquidity indicators were above regulatory standards.

Bank Bukopin said separately it would soon launch a rights issue with the backing of top shareholders, local conglomerate Bosowa and KB Kookmin Bank, part of South Korea's KB Financial Group.

Bukopin's statement did not refer to the investigation and a company spokeswoman did not immediately respond to a request for comment.

Last month the bank told the stock exchange that it had negative cash flow.

On June 25 it said in a stock exchange filing that it had limited maximum daily withdrawals to manage its cash.

KB Kookmin Bank has put $200 million in an escrow account to increase its stake in Bukopin and is completing additional due diligence to meet South Korean rules, Bukopin said.

It said KB Kookmin Bank would likely raise its stake to 37.6% after the rights issue from 22%.

KB Kookmin Bank was not immediately available for comment.

Bosowa has set aside 193 billion rupiah ($13.59 million) to maintain its stake at 23% after the rights issue, president commissioner Erwin Aksa told Reuters.

Aksa welcomed the criminal investigation of social media and said he hoped it would end a "bank run" that had lasted four months.

There did not appear to be any effect on the wider banking sector, with the Indonia overnight interbank money market rate remaining relatively stable.

(Reporting by Tabita Diela and Gayatri Suroyo in Jakarta; additional reporting by Heekyong Yang in Seoul; editing by Ed Davies and Jason Neely)