Bank Bali scandal<\/p>\n
The government should act quickly to clarify the issues in a
\nscandal allegedly involving millions of dollars at Bank Bali
\nbecause it puts at stake the integrity of the Indonesian Bank
\nRestructuring Agency (IBRA), which directly or indirectly
\ncontrols over Rp 600 trillion (US$88 billion) in government
\nassets.<\/p>\n
The issues that surfaced only one week after the surprise and
\nquestionable takeover of the publicly listed bank by the central
\nbank on July 23 could damage the public's confidence in the
\nviability of the whole Rp 550 trillion bank recapitalization
\nprogram.<\/p>\n
As reported in the mass media over the last three days, Bank
\nBali owners, pressured to meet the deadline for putting up their
\nportion of the bank's recapitalization fund, were forced to use
\nthe \"good offices\" of influential government lobbyists reportedly
\nof the ruling Golkar Party to obtain reimbursement from IBRA for
\nabout Rp 3 trillion in interbank credits it had in several banks
\nclosed recently as part of the massive banking reform.<\/p>\n
Bank Bali, as the reports said, succeeded in getting back in
\nearly June Rp 900 billion of the interbank credits from IBRA, but
\nin return had to pay the lobbyists a Rp 550 billion \"brokerage
\nfee\". The story turned another twist when a great portion of the
\nfee was allegedly transferred to the Golkar coffers and another
\npowerful political leader. The reports went on to disclose that
\nBank International Indonesia, another publicly listed bank in the
\ngovernment-sponsored recapitalization program, had earlier been
\nsimilarly squeezed by lobbyists. This bank allegedly paid Rp 400
\nbillion in a brokerage fee to have its interbank credits
\nreimbursed by IBRA.<\/p>\n
The takeover of Bank Bali by the central bank actually raised
\npuzzling questions as to why it was done quietly without clear
\nexplanation. Bank Indonesia only said it had to transfer the bank
\nto IBRA because the owners failed to come up with their share of
\nthe recapitalization fund. But two days later IBRA signed an
\ninvestment agreement with Standard Chartered Bank whereby the UK
\nbank acquired 20 percent of the bank and took over its
\nmanagement.<\/p>\n
These deals were really perplexing and lent credence to
\nsuspicions that a multimillion dollar offense did hit Bank Bali.
\nThe puzzling question is why Bank Bali was not automatically
\nreimbursed by IBRA for its interbank credits because these claims
\nare covered by the government blanket guarantee on bank deposits
\nand claims.<\/p>\n
When Bank Bali was pronounced qualified for joining the
\nrecapitalization program in April, its capital adequacy ratio
\n(CAR), as determined by international accountancy firms assigned
\nby IBRA and the International Monetary Fund, was a negative 8.2
\npercent, and its recapitalization requirement was set at Rp 2.8
\ntrillion. But IBRA announced early last week that the bank's
\ncapital standard, as reassessed under a due diligence by Standard
\nChartered, had deteriorated sharply to a negative 32 percent,
\nthereby catapulting its recapitalization requirement to Rp 4.3
\ntrillion.<\/p>\n
Bank Bali has always been known for its conservative lending
\nstrategy and its CAR, though negative, was the highest among
\nother publicly listed banks selected for the recapitalization
\nprogram. Some rumors had it that the majority owners robbed the
\nbank of its best assets. But how could this have happened when
\nStandard Chartered had signed a letter of intent for acquiring 20
\npercent of the bank as early as April and had put $56 million in
\nan escrow account to back up its commitment? Moreover, since
\nassessment deemed the bank entitled to almost $34 million in
\ngovernment equity funds for its recapitalization, its operations
\nshould have been put under stringent supervision by the central
\nbank.<\/p>\n
It is most imperative for the government to quickly straighten
\nout the issues because the alleged scandal could subvert the
\nwhole economic reform program. Given the universal power and the
\nhuge assets IBRA now controls, estimated at almost twice as much
\nas Indonesia's gross domestic product, even the slightest
\nsuspicion of corruption and collusion within the agency would
\ndamage the public's confidence in the whole banking industry.
\nWithout confidence from the general public as well domestic and
\nforeign investors, the banking industry will remain crippled and
\nthe economy will stay moribund as it is now because banks act as
\nthe brain of the economy, determining the most efficient
\nallocation of resources.<\/p>\n
The issues also make it most urgent and imperative now for the
\ngovernment to require IBRA to publish an audited quarterly
\nfinancial report to enhance its accountability and transparency.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bank-bali-scandal-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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