BCA's plan to buy IBRA assets must be monitored: Bappenas

The Jakarta Post, Jakarta

Plans by Bank Central Asia (BCA) to purchase bank loans held by the Indonesian Bank Restructuring Agency (IBRA) must be closely monitored as the transaction could only benefit the new owners of the bank at the expense of taxpayers, according to a statement issued late on Wednesday by the Office of the State Minister of National Development Planning/Bappenas.

The statement said that the public must be made aware that if IBRA sold the loan assets at a huge discount, it was the taxpayer who would shoulder the loss.

It added that IBRA must disclose the selling price of the loans.

The management of publicly-listed BCA announced earlier this week that it intended to exchange some Rp 10 trillion worth of government bonds held by the bank with the IBRA loan assets.

BCA is now controlled by a consortium led by U.S. investment firm Farallon Capital, which bought a 51 percent stake in March from the government for Rp 5.3 trillion.

BCA currently holds nearly Rp 60 trillion-worth of government bonds, which was injected in the late 1990s to recapitalize the giant retail bank. The state budget covers the interest rate of the bonds, which has been one of the main source of revenue for the bank.

The government had been previously criticized for selling the nationalized bank to a new private owner without first unloading the huge bonds.

"The value of (the government) bonds transferred into the hands of the private buyers of BCA is six times the price of the BCA acquisition," the Bappenas statement said.

"These bonds can be used to purchase the IBRA (loan) assets at a price much lower than the book value of the assets when first transferred to IBRA."

"So the assets bought by BCA could potentially multiply in value at the expense of IBRA because (the latter) has sold them to BCA at a very low recovery rate. The difference is a loss borne by the people."

IBRA took over more than Rp 200 trillion-worth of nonperforming loans from ailing banks in the late 1990s. The agency is mandated to restructure and sell back the loans to raise cash to help finance the state budget deficit.

The agency said on Tuesday that it planned to sell up to Rp 150 trillion-worth of bank loans this year.