IBRA asked to be responsible for Bank Bali decision

IBRA asked to be responsible for Bank Bali decision

JAKARTA (JP): Bank Indonesia has demanded the Indonesian Bank
Restructuring Agency (IBRA) be responsible over the decision to
nationalize Bank Bali following a lawsuit against the central
bank governor by the former owner of Bank Bali.

Bank Indonesia deputy governor Dono Iskandar said in a Nov. 24
memo to IBRA Chairman Glenn S. Yusuf that former Bank Bali owners
Rudy Ramli and Herman Ramli filed a lawsuit recently at the
Jakarta state administrative court against Bank Indonesia
Governor Sjahril Sabirin over his July 23 decision to hand over
the beleaguered bank to IBRA, a unit of the finance ministry.

"But the essence of the lawsuit is the taking over of Bank
Bali by the government," Dono said in his memo, a photocopy of
which was obtained by The Jakarta Post.

He said that the decision to transfer Bank Bali to IBRA was
made by the central bank in order for the agency to restore the
condition of the ailing bank.

"Based on the above consideration ... we expect your readiness
to intervene as a party which is also involved in the case," Dono
said.

He explained that although the lawsuit was groundless, there
was a possibility that the court might annul or delay the Bank
Indonesia July 23 decision.

"If this happens, then all actions taken by IBRA against Bank
Bali would no longer have a legal basis," Dono said.

Citing an example, he referred to the management contract
signed by IBRA and the U.K.-based Standard Chartered Bank (SCB),
and the decision to annul the controversial corruption-linked
transaction agreement between Bank Bali and PT Era Giat Prima
(EGP).

He said the authority of IBRA over Bank Bali only occurred
after the central bank transferred Bank Bali to the agency.

"There's concern that other owners and management of banks
already transferred by Bank Indonesia to IBRA will file similar
lawsuits," Dono said.

In a bid to restructure the country's ailing banking industry,
the banking authority has so far closed down 66 banks,
nationalized 11 and recapitalized eight others.

Bank Bali was taken over by IBRA late in July after its owner
failed to provide cash by the extended deadline to finance 20
percent of the bank's recapitalization cost.

Under the country's bank recapitalization program, the
government will cover up to 80 percent of a bank's
recapitalization cost.

After taking over Bank Bali, IBRA signed management and
investment contracts with SCB, in which the latter would buy a 20
percent stake in Bank Bali to help finance its recapitalization
program, while IBRA would allow the British bank to lead the
management of Bank Bali for three years.

Under the contract, SCB has an option to own up to 100 percent
of Bank Bali in five years, provided IBRA became an 80 percent
owner of the bank after the rights issue.

The contract was hailed as the first major foreign
participation in the recapitalization of the country's battered
banking sector.

But Bank Bali staff staged protests for weeks against the
existence of SCB staff in Bank Bali, leading IBRA to temporarily
replace the SCB management team with the agency's own people plus
outside local professionals.

IBRA has said that it is reviewing its management contract
with SCB, including removing the controversial penalty clause,
which stipulated that SCB would be entitled to a US$25 million
fee if IBRA terminated the contract before expiry, and $2.5
million if the foreign bank decided to pull out from the
agreement.

IBRA has been under fire over its deal with SCB. Bank Bali
staff have accused SCB and IBRA of conspiring to conduct a
hostile takeover of the bank.

Bank Bali was hit by a politically-charged scandal in June,
which centered on the "illegally dubious" transfer of some Rp 546
billion (about $80 million) from the bank to EGP, a private firm
linked to the Golkar Party, prior to the October presidential
election. Golkar was the ruling party at the time.

The government has annulled the transaction, and the money is
now safe in an escrow account.

In a related development, the Attorney General's Office
summoned former finance minister Bambang Subianto and Bank
Indonesia deputy governor Miranda Goeltom on Friday for
questioning in connection with the Bank Bali scandal.

"They are only summoned as witnesses. We need verification on
several pieces of information we have already received from
suspects and other witnesses," said Attorney General's Office
spokesman Soehandojo.

An independent audit report into the Bank Bali scandal, which
was published recently, recommended further investigation into
several high ranking state officials. (rei/emf)