Firms involved in bad debts get special audit<\/p>\n
JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono
\nsaid here yesterday that the central bank has carried out a
\nspecial audit on a number of companies laden with bad debts.<\/p>\n
"The special audit has been undertaken as part of the central
\nbank's integrated measures to deal with non-performing loans in
\nboth state and private banks," Soedradjad said at a business
\nluncheon organized by the Financial Club.<\/p>\n
The central bank governor said that the companies involved
\nmust undertake special audits to decide on which solution to
\npursue. However, he refused to identify which companies would be
\naudited.<\/p>\n
"For state banks, the government has formed a special team
\nmade up of both the central bank and the Ministry of Finance to
\nmanage state banks in handling their bad debt problems,"
\nSoedradjad told around 150 executives of foreign and local
\ncompanies attending the lunch.<\/p>\n
Soedradjad said the special team has assisted with the
\nmanagement of state banks by emphasizing debt restructuring when
\naddressing problem loans.<\/p>\n
The central bank has also conducted a special examination of
\nthe quality of assets held by private banks in order to better
\nassess the severity of the problems faced by the individual
\nbanks, he added.<\/p>\n
The central bank has thus far assessed the productive assets
\nof at least 65 private banks, Soedradjad said. "The outcome of
\nthe assessment will determine their operational soundness."<\/p>\n
"Banks with substantial bad loans are required to form a
\nspecial team to settle their debts," he said, adding that the
\ncentral bank has also set up a special task force for bad debt
\nsettlement. The task force will supervise the steps and measures
\nto be undertaken by the commercial banks' internal teams.<\/p>\n
Salvage<\/p>\n
Soedradjad said that Bank Indonesia is also devising criteria
\nand alternative ways to resurrect the banks beset by large bad
\nloans, through measures such as mergers, consolidation and
\nacquisition.<\/p>\n
The central bank will also seek to locate potential investors
\nto rescue banks suffering liquidity problems, he added.<\/p>\n
Bank Indonesia has been sharply criticized for its lack of
\nadequate supervision, considered to be a major cause of the sharp
\nincrease in non-performing loans in the country.<\/p>\n
The bad (unpaid) debts of both state and private banks,
\naccording to the central bank, reached around 3.5 percent of the
\ntotal outstanding loans of Rp 145.79 trillion ($69.42 million) as
\nof last November.<\/p>\n
The non-performing (bad and doubtful) loans of state banks
\nalone reached Rp 14.97 trillion, or some 21 percent of their
\noutstanding loans as of last October.<\/p>\n
Soedradjad said that in an effort to improve the rules
\ngoverning the recovery of bad debts through the legal system, the
\ncentral bank has conducted intensive discussions with related
\ninstitutions, including the Supreme Court, the Ministry of
\nJustice, the Attorney General's office, the National Land Agency
\nand the State Receivership Agency.<\/p>\n
"These efforts are expected to solve the bad loan problems
\nfaced by a number of banks," Soedradjad said.<\/p>\n
In order to improve the effectiveness of bank supervision, the
\ncentral bank also will improve its organization and the quality
\nof its human resources.<\/p>\n
"On-site inspections will be carried out more often to keep
\nthe central bank better informed about the financial situations
\nof commercial banks," he said. (hen)<\/p>",
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