Wed, 19 Feb 2003

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.