Bank liquidation costs revealed

Bank liquidation costs revealed

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA)
revealed on Thursday that it has so far cost US$226 million to
overhaul beleaguered banks under its supervision.

The agency's chairman Glenn S. Yusuf said that the total costs
consisted of Rp 1.67 trillion ($222 million) denominated in
rupiah and $4 million.

He said liquidating 10 banks in April and August cost Rp 1.61
trillion.

"Costs associated with liquidating the banks stemmed largely
from the blanket guarantee scheme under which the government
meets all of the banks' obligations," Glenn told House of
Representatives' Commission VIII for the state budget and
finance.

The 10 banks liquidated in April and August were Bank Dagang
Nasional Indonesia, Bank Umum Nasional, Modern Bank, Bank Surya,
Bank Subentra, Bank Kredit Asia, Bank Pelita, Hokindo Bank, Deka
Bank and Centris International Bank.

A further Rp 11.7 billion was spent on consultants fees, along
with Rp 13.4 billion for administration and office costs, Rp 35
billion in accountants and lawyers' fees, and for communications
consultants and advertising, he said.

All funds denominated in rupiah were provided by the
government through the state budget.

Glenn said the World Bank has so far provided $4 million of
the $10.8 million it pledged following an IBRA request for $20
million in assistance.

The $4 million was used to pay five consulting companies to
conduct due diligence on the 24 banks under IBRA supervision
along with a further seven state banks, adding that the remaining
$6.8 million would be disbursed in the near future.

There are currently 24 banks under IBRA's supervision,
including Bank Central Asia, Bank Danamon, Bank Tiara Asia and
Bank PDFCI, which were taken over by the government last August.

Glenn said that BCA, which was formerly owned by the Salim
family and some of Soeharto's children, has repaid almost Rp 12
trillion of Rp 35 trillion in liquidity support it received from
Bank Indonesia (BI).

"The money that BCA used to repay the loan came solely from
the public. Depositors have returned to the bank because it has
proved itself to be reliable," he said.

Glenn said Danamon, which was formerly controlled by Usman
Admadjaja, had repaid just over Rp 1 trillion of Rp 25.8 trillion
it received in liquidity support.

Glenn said that a holding company formed by IBRA to manage
assets relinquished by banks as collateral for the liquidity
support had faced some difficulties since coming into operation.

Transferring assets linked to publicly-listed banks has been
particularly problematic because the process requires the
approval of 75 percent of minority shareholders, he explained.

Bank Indonesia has yet to hand over some assets received from
troubled banks as collateral on liquidity support, he added.

Glenn said that collateral put forward by several banks
included assets which were "legally flawed", making it impossible
for IBRA to take control of them.

"If we did take over these assets, we would face legal
action," he said, adding that 90 percent of the assets used as
collateral by Bank Centris and Bank Kredit Asia fell into this
category. (das)