Govt lacks political will to resolve Bank Lippo plight

Zakki Hakim, The Jakarta Post, Jakarta

The decision to retain Mochtar Riady as the chairman of Bank Lippo's board of commissioners reflected the government's lack of political will to resolve the problems at the publicly-listed bank, a legal banking expert said.

Law expert Sutan Remy Sjahdeini said on Wednesday that the Indonesian Bank Restructuring Agency (IBRA), which represents the government as the controlling shareholder of the bank, should have exercised its influence by removing Mochtar and his associates both from the board of directors and commissioners.

An extraordinary shareholders meeting of the publicly-listed bank on Tuesday appointed six new directors (out of the total nine-member board of directors), most of them representing IBRA, which owns a 59 percent stake in the bank. Mochtar, the former owner of the bank, owns a 9.7 percent stake, while the remainders are held by the public investors.

But the meeting decided to retain Mochtar as the chairman of the board of the commissioners. Two board members close to him were also retained, while six others were newly elected, also mostly representing IBRA.

But many analysts were disappointed with the decision to keep Mochtar and his friends in the bank's management and board of commissioners, saying that to improve the image of the bank it was essential that people linked to Mochtar must be dismissed from the bank.

There has been allegations that the bank's former owner had been involved in illegal maneuvers designed to eventually allow them to regain control of Bank Lippo at a very cheap price, but at the expense of the state which had paid dearly to bailout the bank during the 1997 financial crisis.

The Capital Market Supervisory Agency (Bapepam) has previously imposed a penalty on Bank Lippo management for giving misleading information to the public late last year.

Bank Indonesia and Bapepam are still in the process of investigating other alleged wrongdoings, including share trade manipulation and wrongful asset revaluation.

Analysts have said that all these have baffled investors, and that the authorities must act quickly to protect the interests of investors, including the government.

The result of the shareholders meeting cannot be annulled, except if the central bank could prove the alleged financial scam.

Elsewhere, Sjahdeini said the penalty given to the Bank Lippo management should provide sufficient reason for IBRA to completely change the bank's management and board of commissioners as stipulated under the Investment Management and Performance Agreement (IMPA), signed by the agency and the bank's former owner in 1999 when the government made the bailout.

The IMPA document had never been disclosed to the public. But State Minister of State Enterprises Laksamana Sukardi, a former Bank Lippo top executive, said that the government actually had already violated IMPA by assigning more than two nominees for the board of directors and management.

Sjahdeini, however, said that if the IMPA was deemed to move against the public interest, the government could appeal to the court to annul the contract.

The document was made during the previous administration of B.J. Habibie, a hand-picked successor of former authoritarian president Soeharto, whose family members and close friends owned the troubled banks rescued by the government's costly bailout program.