IBRA hit with Rp 550b Bank Bali scam allegations

JAKARTA (JP): Indonesia's most powerful business entity, the Indonesian Bank Restructuring Agency (IBRA), has put its reputation at stake after a banking analyst accused one of its senior officials of involvement in a rent seeking activity allegedly involving Rp 550 billion (US$80.8 million).

Legal banking expert Pradjoto said that a senior official of IBRA and two executives of a major political party, had colluded to force Bank Bali to provide a huge fee to help the bank recoup back its claims on closed-down banks.

"This kind of allegation, which I got from a very reliable source, has to be thoroughly investigated. Why are these rent seekers still operating amid this difficult time," Pradjoto said at a banking seminar.

He said it was possible that such a rent seeking activity also occurred in other banks.

He said the Bank Bali scandal also involved other high-ranking government officials which he would disclose at the right moment.

Pradjoto said that Bank Bali had Rp 3 trillion (US$441.2 million) in interbank credits to three closed-down banks, Bank Dagang Nasional Indonesia (BDNI), Bank Bira and Bank Umum Nasional (BUN).

The banks were closed down by the government in March, but under the government's blanket bank guarantee program, such interbank claims should have been covered by IBRA, an agency under the finance ministry.

Pradjoto said the scam occurred after Bank Bali, under pressures to put up more capital under a government-sponsored recapitalization scheme, failed to collect the interbank credits from IBRA.

He said that two senior officials of a major political party, including a property businessman, and the IBRA official came to offer assistance to Bank Bali directors to recover the Rp 3 trillion credits but with a huge fee.

Pradjoto said that on June 2, some Rp 900 billion was transferred to Bank Bali, and the next day some Rp 550 billion was withdrawn from the bank and transferred to the rent seekers fee.

He said that Rp 125 billion of the amount was transferred to Bank BNI, but he had no knowledge of to which banks the remaining amount was transferred.

He speculated that part of the money was used to finance the campaigning activities of the political party during the recent election period.

IBRA officials and former Bank Bali president Rudy Ramli declined to comment on the allegation.

Bank Bali was taken over by IBRA on July 23 after the owners failed to put up their portion of the recapitalization requirement and was immediately put under the management of Standard Chartered Bank.

The agency has signed an investment agreement with U.K.-based Standard Chartered, in which the latter will buy a 20 percent stake in Bank Bali in return for management control in the bank.

Bank Bali is expected to offer a rights issue sometime in October to make the transaction possible.

IBRA, formed early in 1998, is currently in control over some Rp 600 trillion worth of various assets, making it the largest and most powerful entity in the country.

The agency will sell some of the assets to raise proceeds to help finance the government bank restructuring and recapitalization program, which is estimated to cost some Rp 550 trillion or about 50 percent of gross domestic product (GDP).

Part of the assets are nonperforming bank loans (NPLs) owed by politically well-connected businessmen, including companies controlled by sons and daughters of former president Soeharto.

The agency is also empowered by law which makes it superior to other institutions. It can seize and sell the assets of bank debtors without having to be afraid of being sued.

It decides which investors to sell various assets in its hands. It can change the management of major banks and companies in the country because they are mostly under its control.

Some legislators and economists earlier said that this kind of vast power and wealth was open to abuse.

The scandal at Bank Bali has once again raised such a concern.

"If it is true, the scandal will damage the credibility of IBRA," said senior banker I Nyoman Moena.

He urged IBRA to clarify the matter.

IBRA expects that its deal with Standard Chartered would be a landmark deal to attract other foreign investors to buy into other local banks and other assets controlled by the agency.

"It (the Standard Chartered deal) is intended to accelerate the bank restructuring program," said IBRA deputy chairman Farid Harianto. (rei)