BPK to use foreign auditors for liquidity fund probe

BPK to use foreign auditors for liquidity fund probe

JAKARTA (JP): The Supreme Audit Agency (BPK) plans to involve
foreign auditors to assess possible mishandling of the central
bank's multibillion dollar emergency liquidity support to ailing
institutions, agency chief Satrio Billy Yudono said.

Yudono said on Wednesday the assistance of foreign auditors
was needed to be able to complete the investigative audit as
quickly as possible and with satisfactory results.

"Some (auditors) have come to us and expressed interest," he
said following a meeting with House of Representatives Commission
IX for financial and development planning affairs.

He declined to name the auditors.

Yudono said that BPK also expected the International Monetary
Fund (IMF) and the World Bank to provide technical assistance.

"We expect to be able to complete the audit in three to six
months time," he said, adding that the investigation would start
immediately.

Yudono said that the investigative audit was aimed at creating
a stronger and more reliable central bank which could become the
"locomotive" to create a healthy domestic banking system.

"The main aim is to create a better central bank," he said.

Yudono earlier said the Attorney General's Office would be
involved in the investigative audit to anticipate possible crimes
or violations of law in the channeling of the liquidity support.

A BPK general audit document leaked to the media showed that
some Rp 80.25 trillion (US$11 billion) in Bank Indonesia
liquidity support was channeled inappropriately, violating even
the central bank's own ruling.

The audit pointed out that according to the ruling, banks
receiving the credit facility were only those with a minimum
capital adequacy ratio (CAR) of 2 percent, the recipient banks
must surrender promissory notes equivalent to the value of the
credit and have an additional asset collateral worth at least 50
percent of the credit facility.

The audit document also said that BPK could not classify the
status of Rp 9.42 trillion in liquidity support.

The general audit was made based on Bank Indonesia's balance
sheet as of May 1999, when the central bank became an independent
institution based on a new central bank law.

The government ordered the central bank to inject some Rp
164.5 trillion ($22.8 billion at the current market rate) in
liquidity support between late 1997 and 1998 to some 54 ailing
banks in a bid to prevent a complete breakdown in the domestic
banking system when the economic crisis heightened.

The government has issued bonds to cover the Rp 164.5 trillion
liquidity support.

But there have been strong demands for the government to
reassess its obligation to the central bank as some of the
liquidity support was channeled inappropriately.

"Some of the liquidity support was not channeled in accordance
with Bank Indonesia's own ruling. We don't want taxpayers to
bear this," legislator Didi Suprianto said following the BPK
meeting.

He said the recipient banks and the central bank must be
responsible for this.

Yudono declined to confirm the figure.

He acknowledged that the central bank rejected the BPK audit
result because of differences in the criteria being used.

Yudono declined to speculate on whether the BPK investigative
audit would end up with the dismissal of Bank Indonesia Governor
Sjahril Sabirin, as the decision could only be made by the House
of Representatives. (rei)