BPK examines bank intermediary role in ongoing IBRA audit

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.