BPK slams IBRA profligacy
Tony Hotland, Jakarta
The Supreme Audit Agency (BPK) has found the dissolved Indonesian Bank Restructuring Agency (IBRA) "wasteful" in its disbursement of government recapitalization funds to insolvent banks following the late 1990s financial crisis.
The government via the IBRA launched the costly bank recapitalization program six years ago to boost the capital adequacy ratio (CAR) of troubled banks to at least 4 percent. CAR measures a bank's capital against its assets mainly loans. The higher the CAR, the healthier the bank is.
"From our audit, we discovered some Rp 7 trillion (US$777.77 million) in excess of the recapitalization funds. It's not legally wrong because the IBRA was allowed to disburse recapitalization funds to lift the banks' CAR level to at least 4 percent. But why did they disburse more (funds) if 4 percent was enough?" BPK auditor Bambang Wahyudi said on Friday.
Following the regional financial crisis in 1997-1998, many of the country's commercial banks were in near collapse as their CAR plunged into negative territory.
The government injected bonds worth around Rp 430 trillion to some 38 ailing banks, lifting their CAR above 4 percent (in some cases up to 8 percent). Taxpayers through the state budget until now continue to pay the interest rate of the huge amount of bonds.
Bambang said many of the recapitalized banks had continued to enjoy strong profits mainly due to interest revenue from the government bonds, not from normal lending activities.
"It should have been the task of the management of those banks to improve (the banks') condition. But their recovery mainly resulted from the funds injected by the IBRA," Bambang said.
He said it would be difficult to make the recapitalized banks return the excess funds to the state.
"The funds must have been used to increase their capital and to cover their obligations. But we suggest a precise due diligence review for the excess funds," he said.
The BPK has been tasked with auditing the performance of the IBRA over its more than five-year existence, particularly monitoring the effectiveness of its bank recapitalization program. The agency was dissolved in February this year.
The BPK submitted its audit on the IBRA's performance early this week to the House of Representatives. It is now auditing the IBRA's closing financial reports and expects to complete the audit before September.
In the recently submitted audit report, the BPK also suggests the government conduct a due diligence review of IBRA's failure to recapitalize several banks.
The review is intended to examine the reasons behind the failures to recapitalize Bank Universal, Bank Patriot, Bank Prima Expres and Bank Artamedia, despite the government injecting Rp 10.12 trillion in funds.
These four banks were later merged with Bank Bali to set up Bank Permata.