Bapepam considers tough action against Lippo

Bapepam considers tough action against Lippo

The Jakarta Post, Jakarta

The Capital Market Supervisory Agency (Bapepam) said it was
considering taking strong measures against Bank Lippo's
management as recommended by the Jakarta Stock Exchange (JSX)
after the publicly listed bank gave misleading information to
investors.

Bapepam chairman Herwidayatmo said on Tuesday that an
investigation currently underway was being carried out in
cooperation with JSX and the Indonesian Bank Restructuring Agency
(IBRA), and therefore inputs from either institution would be
highly valued.

"The JSX has given us substantial reports, and we'll take that
into consideration in taking the final decision, to be announced
by the second week of March," Herwidayatmo said.

The JSX earlier ordered the bank's management to submit
progress reports on its financial condition every week, starting
on Feb. 24.

Lippo has been under investigation by the capital market
watchdog after months of public outcry over alleged inaccurate
financial reports issued by Lippo's management, which is being
accused of acting on behalf of the bank's former owner -- the
Riyadi family.

The accusations of manipulation emerged late last year, after
the bank issued two different financial reports.

While in November the reports showed a net profit of Rp 99
billion and a capital adequacy ratio (CAR) of 24.8 percent as of
September, another report, issued only a month later, said that
the bank posted Rp 1.27 trillion in losses and saw its CAR
decline to around 4 percent during the same period.

The management has said that the different reports were due to
different treatment with regards to the sharp decline in the
value of foreclosed assets. In the first report -- which was
published in the media, the decline in the value of assets had
not been obtained.

That, the management claimed, had pushed the bank's CAR down
as it had to set aside around Rp 1 trillion to back up the
deteriorating foreclosed assets. CAR measures a comparison
between a bank's capital with its risk-weighted assets.

The foreclosed assets refer to some Rp 2.7 trillion in mainly
property assets the bank seized from debtors who defaulted on
their loans before the bank was recapitalized in 1999.

Nevertheless, allegations have been rife that the bank's
deteriorating capital is only part of maneuvers by its former
owner to regain control of the bank.

Critics said that the maneuvers are only aimed at justifying
the bank's long-standing plans for a rights issue, which is
issuing new shares to raise cash to help improve its capital
condition.

Lippo was recapitalized with Rp 7.2 trillion in state funds.
IBRA holds now a 59 percent stake in the bank, cutting the
ownership of the old owner -- which was represented by PT
Lippo.Net -- to 8.1 percent.