Government agrees to pay compensation to Rudy

JAKARTA (JP): The Financial Sector Policy Committee (FSPC) approved on Thursday the Indonesian Bank Restructuring Agency's (IBRA) plans to recapitalize the publicly listed Bank Bali and to provide some Rp 9 billion (US$1 million) in compensation to the bank's former owner and CEO Rudy Ramli.

IBRA deputy chairman Jerry Ng said that the recapitalization plan was expected to be approved by the House of Representatives commission IX on financial and development planning affairs on Friday (today).

"The FSPC has agreed to pay Rp 9 billion compensation. We are seeking the House's approval tomorrow," Jerry said on the sidelines of a meeting with the FSPC.

The FSPC groups several senior economic ministers.

IBRA announced earlier this week it would recapitalize the ailing Bank Bali following an out-of-court settlement with Rudy.

The agency nationalized Bank Bali last year, but Rudy filed a legal suit against the decision. The Jakarta Administrative Court ruled in favor of Rudy. IBRA then appealed the decision.

The ensuing legal battle delayed the recapitalization of Bank Bali, as the House insisted that it would only approve the recapitalization plan if the government managed to settle the dispute first.

After serious threats from the government that Bank Bali might have to be liquidated, IBRA and Rudy finally reached agreement.

As part of the out-of-court settlement, IBRA agreed to pay Rudy Rp 9 billion compensation, a decision which is likely to be strongly criticized by legislators.

Rudy had earlier demanded compensation to pay for his lawyer's fees and for the loss of his salary as the bank's president since it was nationalized by the agency.

IBRA has said that the compensation would come from its coffers.

Asked what happen if the House rejected IBRA's proposal on Bank Bali, Jerry said: "We may have to come up with another option. But we should not speculate." He declined to say what the other option was.

The cost of recapitalizing Bank Bali was estimated to be Rp 4.9 trillion if the program was completed by June; each month of delay would inflate the cost by Rp 40 billion.

The government plans to inject bonds into the bank to finance the recapitalization program.

It has nearly completed the bank recapitalization program, except for Bank Bali, state-owned Bank Rakyat Indonesia (BRI) and Bank Tabungan Negara (BTN).

The government is also scheduled to seek the approval of the House to recapitalize Bank BRI after it has completed the management reshuffle at the bank as demanded by the International Monetary Fund.

The recapitalization cost of Bank BRI is estimated at Rp 29.2 trillion. (rei)