IBRA did job, but success unclear, says audit agency

Tony Hotland, Jakarta

The Supreme Audit Agency (BPK) has concluded that the dissolved Indonesian Bank Restructuring Agency (IBRA) performed its duty of restructuring the majority of troubled banks, but refused to judge its performance.

The BPK's head Satrio "Billy" Joedono said the agency was not in a position to decide if IBRA had successfully done its job, and would leave it to the House of Representatives to make a judgment.

He said the final audit results of the agency's performance -- which was being finalized by the BPK to make sure all terminologies were "readable" -- would be submitted to the House within the next two weeks.

"Based on our audit, IBRA managed to restructure most of the banks. However, that's not an automatic indication that IBRA succeeded in carrying out its task," he said.

Billy refused to disclose the names or the exact number of the banks the agency had managed to restructure.

He explained, however, the banks taken over by IBRA were of different sizes and had suffered various degrees of damage. The high number of banks which the agency managed to restructure did not mean it had done its job successfully.

"Maybe, it managed to restructure small banks, but failed as far as big banks were concerned," he said.

Under the Office of State Ministry for State Enterprises, IBRA was set up in 1998 amid the height of financial crisis that left the country's banking system in complete disarray. It was tasked to restructure fractured banks, sell their assets at a maximum recovery rate and litigate bank owners who had failed to repay their debt to the government.

Analysts have criticized its performance, saying that those banks are yet to prove their ability to survive. They also point out weak internal control mechanisms and the current low lending rates to the corporate sector as indications that the country's banks have not really recovered.

Until its closure in February, IBRA -- which took over Rp 650 trillion (US$75 billion) worth of assets from troubled banks and their former owners -- had only raised around Rp 168.2 trillion, or a mere 28 percent recovery rate.

A BPK auditor, Bambang Wahyudi, previously said that the BPK was using 12 indicators in auditing IBRA's performance in restructuring banks, the main three of which were the banks' capital adequacy ratios (CAR), non-performing loans (NPL), and their intermediary roles.

The newly completed BPK audit reviewed only the performance of IBRA in carrying out its chief task to restructure the banks. The BPK plans to conduct audits on IBRA's other tasks.

To audit IBRA's other tasks, Billy also said that the BPK needed to study IBRA's accountability report to the Ministry of Finance. The ministry had promised to provide a copy of the report by April 30, but the BPK is yet to receive it.