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.