BPK examines bank intermediary role in ongoing IBRA audit

P.C. Naommy, The Jakarta Post, Jakarta

The Supreme Audit Agency (BPK) said an ongoing audit into the Indonesian Bank Restructuring Agency (IBRA) was taking place to examine its performance in rehabilitating the country's troubled banking sector.

"The point is we want to know whether IBRA has been able to do what it was meant to do in restructuring insolvent banks," BPK auditor Bambang Wahyudi told reporters on Friday.

Bambang said that BPK would try to finish the audit before Feb. 27.

He said that BPK was using 12 indicators in the performance audit work. Three of the main indicators are capital adequacy ratio (CAR), non-performing loans (NPL) level and bank intermediary roles.

BPK is conducting the performance audit as IBRA is set to be discontinued on Feb. 27. IBRA, which was set up in 1998 following the Asian financial crisis, was mandated primarily to restructure troubled banks. The agency took over or acquired majority stakes in several banks following the crisis, in what analysts have determined was the country's most costly government bailout of banks. But IBRA has now sold majority stakes in many of the banks and merged others.

While many of the banks now have a higher CAR level and lower NPL ratio, many analysts said that most of the country's banks have yet to resume a crucial intermediary role as lending to the corporate sector remains slow.

CAR is the ratio between a bank's capital and risk-weighted assets including loans. Most of the banks have CAR ratios above the central bank's 8 percent minimum requirement.

NPL is the ratio between a bank's bad debt level and total outstanding loans. Many of the banks' NPL ratios are now below the central bank's 5 percent limit.

Most banks have yet to resume their lending activities to the corporate sector as they still see a huge risk in the latter due to the slow progress in the restructuring of debts owed by the corporations. One of IBRA's main tasks was to restructure corporate debts.

The central bank has been aggressively decreasing its benchmark interest rate in a bid to encourage banks to also lower their lending rates so they will be more affordable to the corporate sector, which will lead to greater domestic investment.