Dismiss Bank Lippo's management: Indef

Dadan Wijaksana, The Jakarta Post, Jakarta

The Institute for Development of Economics and Finance (Indef) urged the Indonesian Bank Restructuring Agency (IBRA) to dismiss the management and board of commissioners of Bank Lippo to avoid further losses to the state.

The private think thank said Wednesday they should be held responsible for not only giving misleading reports to investors, but also for their systematic attempts to allow the bank's former owner to regain control of the bank cheaply.

"The bank's board of directors and commissioners who had either been involved in this attempted looting or let this (fiasco) happen, should be removed," Indef executive director Iman Sugema said. He was delivering a report composed by the institution during a press gathering.

Iman went on to say that the banking authority, in this case Bank Indonesia, should prohibit the bank's former owner, led by Mochtar Riady, from ever owning a bank again.

All these measures needed to be carried out immediately as the affair had not only hurt investors' confidence in Indonesia's banking industry, but had also caused the value of the bank to drop markedly, he said.

"What they have done, in a deliberate way, has led to a massive decline in the value of the bank's shares, which has already cost the state dearly," he said.

He was referring to the fact that, under the current price, the government's 59 percent stake in the bank would only be worth around Rp 600 billion, compared to the about Rp 7.2 trillion the government spent when it recapitalized the bank in 1999.

Lippo's shares are currently traded at about Rp 250 per share.

Meanwhile, another Indef economist, Faisal Basri, hit out at the country's financial authorities for failing to react swiftly over this case.

"These have once again proved that the financial authorities, from Bank Indonesia, Bapepam, the JSX (Jakarta Stock Exchange) to IBRA, are toothless when it comes to dealing with powerful bankers," said Faisal.

Bapepam is the country's capital market watchdog.

Lippo's management has been under fire lately for allegedly conducting manipulations intended to worsen the bank's financial condition.

Critics have said the management has deliberately lessened the values of the bank's foreclosed assets, so the bank was forced to set aside a huge amount of provisions to cover that, a move which eventually dropped the bank's capital.

By providing about Rp 1 trillion in provision, the bank's capital adequacy ratio (CAR) -- a ratio between a bank's capital against its risk-weighted assets -- has dropped to around 4 percent, well below Bank Indonesia's minimum CAR requirement of 8 percent.

Many said that such maneuvers only aimed to justify the bank's plans for a rights issue, issuing new shares to raise capital, which will then allow the former owner to repurchase the bank at a very cheap price.