Mon, 03 Jan 2000

Central bank fires back at state auditors

JAKARTA (JP): Bank Indonesia fired back at the Supreme Audit Agency (BPK) on Sunday after the latter claimed that irregularities in the central bank's books prevented it from forming any opinion regarding the health of the bank.

BPK Chairman Satrio "Billy" Joedono and Minister of Finance Bambang Sudibyo visited the House of Representatives on Friday to present the agency's report of Bank Indonesia's financial position as of May 17, the date it legally became an agency independent of the government.

Bank Indonesia had earlier asked BPK to delay the presentation until after it had a chance to discuss it with the auditors, and warned that premature public disclosure could damage the reputation of Indonesia's monetary system.

Billy and Bambang also told reporters on Friday that Bank Indonesia's equity had turned negative and that it needed to be recapitalized.

The report also pointed out at "weak internal controls" of Bank Indonesia that led to the auditors' inability to fully carry out the auditing process.

Bank Indonesia Governor Sjahril Sabirin said on Sunday that BPK was only required by law to audit the bank's balances at the start of the period when it became an independent agency.

"Bank Indonesia does not see any clause calling for an opinion about starting balances," it said in a statement.

It accused state auditors for using different accounting standards from those followed by the central bank which had been approved by the government and the International Monetary Fund.

Sjahril, who called a media conference on Sunday, said that given the sensitivity of the issue, he would have preferred to discuss the matter with BPK behind closed doors. Since BPK made public its findings, the bank was obliged to respond, he said.

Bank Indonesia said it would welcome the government's plan to conduct an investigative audit on the emergency liquidity supports extended by the bank.

One crucial point of debate between the bank and its auditors is regarding the status of Rp 51.7 trillion of the liquidity credits that were extended to bail out many commercial banks during the economic crisis in 1997-98.

The money was part of the Rp 164.5 trillion (US$23.5 billion) in liquidity credits channeled by Bank Indonesia as part of the government's blanket guarantee on all banks.

The Ministry of Finance claimed that Rp 51.7 trillion of these loans did not meet the criteria under the blanket guarantee agreement.

Bank Indonesia agreed that the criteria were still in dispute.

Bank Indonesia Deputy Governor Aulia Pohan, speaking at the same media conference, warned that unless the government accepted the claims, 20 banks could collapse, according to

Aulia said the current government could not simply renege commitments made by the previous government of President B.J. Habibie which issued the guidelines for the liquidity credits.

In an apparent attempt to limit the damage caused by his report, Billy said on Friday that Bank Indonesia could still continue its interbank clearing activities and would be able to meet its obligations despite its negative equity position.

BPK conducted a general audit on Bank Indonesia's initial report per May 17 from Sept. 1 through Dec. 7, assisted by independent auditor Siddharta & Harsono/KPMG.

The agency tagged a "disclaimer" or "no opinion" label on its audit of Bank Indonesia.

"The results of this audit, however, are not about the life and death of Bank Indonesia. These results are about openness, about transparency," he said.

He said the reason why the agency gave such a conclusion was the serious weaknesses in the central bank's internal control. For instance, Bank Indonesia did not have a complete and reliable list of fixed assets and inventory of assets.

Other weaknesses in the bank's internal control included the fact that Bank Indonesia did not have certificates of ownership for its gold assets deposited in overseas custodian banks.

Bambang said the government was prepared to recapitalize to fill the hole in the central bank's balance sheet. "With approval from the House, the government will recapitalize this negative equity," he said.

He said the government had secured the IMF's approval and it was now up to the House.

Bambang also called on the House to assign BPK to follow up the audit results by conducting an investigative audit on BI.

Based on the results of BPK's investigative audit, the government will assign the Attorney General's Office to take legal proceedings against those suspected of committing criminal actions.

He suggested that Bank Indonesia reevaluate, in one month's time, all its assets based on the current fair market value to determine its equity. (06/rid)