IBRA has failed to cure banks: Analysts

IBRA has failed to cure banks: Analysts

Tony Hotland, The Jakarta Post, Jakarta

Less than a fortnight before the official Feb. 27 closure of
the Indonesian Bank Restructuring Agency (IBRA), economic
analysts are saying that the agency has been unsuccessful in
carrying out its main task of curing the country's ailing banking
sector.

Analyst Deni Danuri from the Center of Banking Crisis (CBC)
said that, despite all the positive figures IBRA had reported,
the agency had yet to prove the soundness of the banks it took
over following the financial crisis in 1997.

"Yes, the non-performing loan (NPL) rate is declining, and the
CAR is increasing," Deni said, referring to the capital adequacy
ratio. "But the real definition of a healthy banking sector is
banks' functioning in their intermediary role, which has not
improved at all," he said at a discussion on IBRA on Wednesday.

A bank's intermediary role is to provide corporate loans.
According to IBRA's reports, the NPL rate is at around five
percent, compared to over 50 percent during the crisis, while the
CAR has risen to over 20 percent, compared to less than -20
percent.

Governmental Decree No. 17/1999 on IBRA says the agency may be
disbanded at the end of its five-year mandate if the government
considers that the agency has completed its tasks well.

Economist Gatot Arya Putra said that banking assets nowadays
were largely made up of bonds issued by the government, which are
debts, and so raised uncertainties about repayment, he said.

The Supreme Audit Agency (BPK) is currently auditing IBRA's
performance in restructuring the banking sector.

BPK auditor Bambang Wahyudi said the agency could not yet give
an opinion as to whether IBRA had succeeded or failed in its
tasks.

"Only after we finish auditing its performance in relation to
its three tasks can we tell the real condition. We're now
finalizing our audit results on IBRA's first task, which is to
restructure banks, and hopefully can start on the others
(tasks)," he said at the same discussion.

IBRA's other tasks include restructuring the corporate sector
and recovering state funds used to bail out ailing banks during
the crisis.

Bambang said he could not disclose any results, as they had to
be submitted to the House of Representatives first before they
were publicized.

The BPK is using 12 indicators in IBRA's performance audit,
the main three being the CAR, the NPL and the intermediary role
of banks.

Bambang also reminded IBRA officials to make copies of all
documents generated during their five-year term and arrange them
chronologically as reference in the auditing process.

Meanwhile, analysts urged IBRA to work with the Financial
Transaction and Report Analysis Center on its closure, so that a
closer look could be taken at the haphazard transactions and
alleged corruption that had occurred during its mandated term.