BPK slams IBRA profligacy
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.