IBRA delays payment of interbank claims

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) has delayed the payment of Rp 5 trillion (US$695 million) in interbank claims owed by closed banks to surviving banks, leaving several of the latter in danger of closure.

IBRA's deputy chairman Arwin Rasyid said on Friday the agency would start paying the interbank claims once the verification process by the auditor was completed, expected in early February.

He said that verification attempts on some interbank claims were held up because of "inconclusiveness and unverifiability" due to a lack of supporting data, prompting IBRA to make the delay to get more data.

IBRA was supposed to settle the interbank claims in December 1999.

So far, IBRA has only settled Rp 1 trillion worth of interbank claims, out of an estimated Rp 6 trillion of interbank claims the agency must cover.

International auditor Ernst & Young has been appointed to verify the claims, whether they are eligible to be covered by the government blanket guarantee program.

The government launched a blanket guarantee program in early 1998, whereby all obligations of closed banks, including deposits and interbank claims, were fully guaranteed by the government.

The program was launched by the government in a bid to prevent a complete breakdown of the domestic banking system as confidence in the industry plunged to its lowest point in 1998, when the financial crisis deepened.

But IBRA suspended payment of the interbank claims following a high profile Bank Bali scandal in July last year, as it indicated that the program was prone to abuse by both politicians and corrupt authorities.

The scandal centers in the "illegal" transfer of Rp 546 billion from Bank Bali to a private firm linked to the Golkar political party which helped the bank recoup Rp 904 billion in interbank claims on a closed bank.

The domestic banking community has long urged IBRA to settle immediately the remaining interbank claims.

Analysts have said that several banks might need the cash to increase their capital adequacy ratio (CAR) level to the minimum 4 percent requirement.

Bank Indonesia, the central bank, has threatened to close banks with a CAR below 4 percent if they fail to improve their capital condition by the end of this month.

IBRA has been criticized for its slowness in handling the country's bank restructuring program, particularly in recovering the huge nonperforming loans of closed banks or banks under its supervision and the selling of bank assets.

Because of this, President Abdurrahman Wahid fired IBRA chairman Glenn Yusuf last week and appointed his deputy, Cacuk Sudarijanto, to become the new IBRA chairman.

Separately, Arwin said in a media statement that former owners of 25 closed banks had signed a letter of commitment with IBRA to settle their obligations with the government.

Arwin also said that IBRA had agreed to free former owners of three frozen banks from having to pay similar obligations because they have not violated banking regulations.

Arwin did not name the banks, but he was referring to the 38 banks closed by the government last year.

The former owners of the closed banks must repay the massive liquidity support injected by the government into the banks in 1998 because the banks had violated banking regulations, particularly the legal lending limit ruling by channeling most of their money into affiliated business groups.

"Other frozen bank shareholders might be relieved of the obligations based upon the same reasoning," Arwin said.

He added that IBRA would propose a new formula in calculating the obligations of the former owners of the closed banks following rejection of the earlier formula.

He said that the final say would be made by the Financial Sector Action Committee, which groups several senior economic ministers. (rei)