Foreign firms to reaudit nine private banks

JAKARTA (JP): The government has hired four international accountant firms to reaudit the nine private banks joining the state-sponsored bank recapitalization program due to concerns of possible deterioration in the banks' capital conditions.

The head of asset management investment at the Indonesian Bank Restructuring Agency (IBRA), Dasa Sutantio, said on Monday the new due diligence might result in a higher recapitalization cost than initially calculated based on December 1998 audits because the banks might have continued to suffer negative interest rate spread between January and April 21, the deadline to meet all the requirements to join the recapitalization program.

"The macroeconomic condition could have affected the banks (financial) conditions," he said.

The government's bank recapitalization program is designed to bring the banks' capital adequacy ratios (CARs) to a minimum of 4 percent.

CAR is the ratio between capital and risk-weighted assets.

Under the recapitalization program, the government will provide up to 80 percent of the required recapitalization funding by issuing bonds, while the bank owners must provide the remaining funding in cash.

Dasa, however, said the banks' CARs also may have improved because domestic interest rates had declined, which would help improve the collectibility of the banks' assets, particularly nonperforming assets.

It is not clear who would provide the additional recapitalization funding if the banks' financial conditions had deteriorated.

However, Dasa indicated both the government and the bank owners would shoulder any additional costs.

"It (the reaudit) already is clearly stipulated under the joint recapitalization decree from the minister of finance and the Bank Indonesia governor ... the banks know this already," he said.

Bank Indonesia Governor Sjahril Sabirin, however, said separately on Monday the amount of recapitalization funding would be based on the results of last year's financial due diligence audits.

He said the reaudit process was not meant to reassess the amount of recapitalization funding needed, but was a continuing process to make sure the banks met the targets laid out in their business plans.

Asked what would happen if the banks' CARs continued to deteriorate due to negative spread, he said: "We will come up with new measures."

He declined to provide further details.

IBRA corporate secretary Christovita Wiloto, however, said the results of the 1998 audits were only meant to decide which banks would qualify to join the government's bank recapitalization program, and were not meant to calculate the amount of recapitalization funding needed.

He expected the four international auditors to submit their due diligence audits by April 16.

The four auditors are KPMG, which will audit Bank Bali, Bank Universal, Bank Lippo and Bank Bukopin, Ernst & Young, which will audit Bank Niaga, Bank Artha Media and Bank Prima Express, PriceWaterhouseCoopers, which will audit Bank Patriot, and Delloite Touche Tohmatsu, which will audit Bank Internasional Indonesia. (rei)