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)