Firms involved in bad debts get special audit
JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono said here yesterday that the central bank has carried out a special audit on a number of companies laden with bad debts.
"The special audit has been undertaken as part of the central bank's integrated measures to deal with non-performing loans in both state and private banks," Soedradjad said at a business luncheon organized by the Financial Club.
The central bank governor said that the companies involved must undertake special audits to decide on which solution to pursue. However, he refused to identify which companies would be audited.
"For state banks, the government has formed a special team made up of both the central bank and the Ministry of Finance to manage state banks in handling their bad debt problems," Soedradjad told around 150 executives of foreign and local companies attending the lunch.
Soedradjad said the special team has assisted with the management of state banks by emphasizing debt restructuring when addressing problem loans.
The central bank has also conducted a special examination of the quality of assets held by private banks in order to better assess the severity of the problems faced by the individual banks, he added.
The central bank has thus far assessed the productive assets of at least 65 private banks, Soedradjad said. "The outcome of the assessment will determine their operational soundness."
"Banks with substantial bad loans are required to form a special team to settle their debts," he said, adding that the central bank has also set up a special task force for bad debt settlement. The task force will supervise the steps and measures to be undertaken by the commercial banks' internal teams.
Salvage
Soedradjad said that Bank Indonesia is also devising criteria and alternative ways to resurrect the banks beset by large bad loans, through measures such as mergers, consolidation and acquisition.
The central bank will also seek to locate potential investors to rescue banks suffering liquidity problems, he added.
Bank Indonesia has been sharply criticized for its lack of adequate supervision, considered to be a major cause of the sharp increase in non-performing loans in the country.
The bad (unpaid) debts of both state and private banks, according to the central bank, reached around 3.5 percent of the total outstanding loans of Rp 145.79 trillion ($69.42 million) as of last November.
The non-performing (bad and doubtful) loans of state banks alone reached Rp 14.97 trillion, or some 21 percent of their outstanding loans as of last October.
Soedradjad said that in an effort to improve the rules governing the recovery of bad debts through the legal system, the central bank has conducted intensive discussions with related institutions, including the Supreme Court, the Ministry of Justice, the Attorney General's office, the National Land Agency and the State Receivership Agency.
"These efforts are expected to solve the bad loan problems faced by a number of banks," Soedradjad said.
In order to improve the effectiveness of bank supervision, the central bank also will improve its organization and the quality of its human resources.
"On-site inspections will be carried out more often to keep the central bank better informed about the financial situations of commercial banks," he said. (hen)