Foreign firms to reaudit nine private banks

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)