Bank Istimarat, Bank Pelita seek out-of-court deal
Bank Istimarat, Bank Pelita seek out-of-court deal
JAKARTA (JP): The Central Jakarta Commercial Court has asked
the Indonesian Bank Restructuring Agency (IBRA) and owners of the
now defunct Bank Istimarat and Bank Pelita to seek an out-of-
court settlement over the agency's charge that the two banks had
misused the government's emergency loan worth over Rp 3 trillion
(US$340 million).
In the first hearing of the case on Tuesday, chief judge
Subardi told IBRA and the owners of the two closed banks to seek
a "win-win" solution rather than proceed with the legal battle.
Warih Sadono and Slamet Riyadi, IBRA's legal advisors said
they agreed with the court's proposal as long as the deal
satisfies their client.
"We will see what's best for the two sides (IBRA and Bank
Istimarat) but what is clear is that the bank must pay," Warih
told reporters following the hearing.
According to IBRA, Bank Istimarat had misused the government's
emergency loan, or more popularly called liquidity support, worth
Rp 596 billion (about US$79.5 million).
IBRA alleged Bank Pelita of misusing some Rp 2.6 trillion of
the liquidity support injected into the bank to keep it afloat
during the monetary crisis.
The government, through Bank Indonesia (BI), channeled some Rp
144.5 trillion in emergency liquidity support to 48 banks between
1998 and 1999 in a bid to safe them from collapsing amid massive
bank runs.
The public's confidence in the banking industry dropped to its
lowest point following the government's decision, during the
economic crisis in late 1997, to close down 16 private banks.
Some of the banks which received BI's liquidity support had to
be closed down, while others were nationalized and placed under
IBRA.
According to the findings of the Supreme Audit Agency (BPK),
around Rp 138.4 trillion (95 percent) of the emergency loans were
either misused or channeled in violation of banking regulations.
Banks were supposed to use the liquidity support to settle
their obligation. But BPK said the banks used the emergency loans
for other purposes, such as currency speculation, lending to
affiliated business groups and repaying subordinated loans.
The Rp 144.5 trillion in liquidity support has now become the
government's debt to the central bank, for which the government
planned to issue bonds to repay the debt.
Bank Pelita and Bank Istimarat were among the banks the
government suspected of having misused BI's liquidity funds.
IBRA took the two banks' board of directors and owners
business tycoon Hashim Djojohadikusumo and his father, economist
Sumitro Djojohadikusumo to court for their failure to repay the
liquidity support given to the banks.
The agency demanded Hashim and his father Sumitro be held in
custody if they failed to pay their debts.
Should the court grant IBRA's request, Hashim and his father
might be among the first to fall victim to the Supreme Court's
regulation No.1/2000.
The regulation stipulates that uncooperative debtors with
debts of at least Rp 1 billion, could face imprisonment of
between six months and four years.
However, the two banks' legal advisor Hotman Paris Hutapea
said IBRA had addressed the wrong people as Hashim and Sumitro
were no longer owners of the two banks.
He further said that an out-of-court settlement depended on
IBRA appraising the assets it took over from the two banks.
IBRA, he said, took over banks' assets as part of recovering
their debts to the government.
According to him, without an asset appraisal, IBRA and the two
banks would remain in disagreement over how much the banks had to
pay the agency to cover their debts.
The next hearing between IBRA and the two banks will be held
in two weeks.(bkm)