IBRA oversight body to review MSAA agreement

JAKARTA (JP): The newly-formed oversight committee for the Indonesian Bank Restructuring Agency (IBRA) said on Tuesday it would review the controversial Master of Settlement and Acquisition Agreement (MSAA) signed last year by IBRA and former bank owners.

Committee chairman Mar'ie Muhammad said that the main purpose of the review was to minimize potential losses to the government as a result of the agreement.

"It's not about determining the quality or correctness of the agreement. Keep in mind that it was formed under different conditions in the past, let's stop making a fuss about it," he said, adding that the review would start on Thursday.

He said IBRA, having been involved with the agreement from the first, was expected to provide the committee with all the necessary materials and prearrangements for the review.

He said IBRA would have to follow up on the findings of the review, initiating new negotiations with the former bank owners.

"It's crucial for IBRA to have the agreement thoroughly reviewed and possess a strong bargaining position with the debtors. At the end, it's only a matter of business settlement," he said.

The government formed the oversight committee last month to help improve the performance of IBRA and to ensure good corporate governance at the agency which controls nearly Rp 600 trillion worth of assets.

The MSAA agreement was signed by the agency and four former bank owners including the Salim Group (former owner of the nationalized Bank Central Asia), Sjamsul Nursalim (of the now defunct Bank BDNI), Bob Hasan (of the now defunct Bank Umum Nasional), and Sudwikatmono (of Bank Subentra).

Under the agreement, the former bank owners were allowed to surrender assets to repay debts to the government, which via the central bank had channeled massive liquidity supports between 1998 and 1999 to bail out the banks.

The MSAA agreement, however, also stipulated that the former bank owners would not have to provide additional assets if it turned out that the assets, when sold, were not sufficient to cover the debts.

In comparison, IBRA signed a Master of Refinancing Agreement (MRA) with another group of four former bank owners to repay their obligations to the government. But under this agreement, the former bank owners are required to provide additional assets should the assets surrendered to IBRA in exchange for debt are not sufficient to cover those debts.

The government channeled some Rp 112 trillion in liquidity support to the eight banks.

Coordinating Minister for Economy, Finance and Industry Kwik Kian Gie expressed last week his disappointment over the MSAA agreement as it turned out that the value of the assets transferred by the Salim Group, for instance, were worth only Rp 20 trillion compared to outstanding indebtedness of Rp 53 trillion.

Kwik threatened to revise the MSAA agreement because it would cause significant losses to the state and created a burden to tax payers.

Kwik has said that he would discuss the issue first with the House of Representatives before the government or IBRA renegotiated the MSAA agreement with the former bank owners.

Kwik is also the coordinator of the so-called Financial Sector Policy Committee (FSPC), which comprises several senior economic ministers, and is tasked with oversight of IBRA transactions valued at more than Rp 1 trillion.

Meanwhile, Mar'ie expressed optimism that the former bank owners would agree to renegotiate their agreement with IBRA.

"I'm pretty optimistic that debtors will cooperate. As Indonesian citizens I think they're also willing to make it better for the country," he said.(rei/cst)