IBRA oversight body to review MSAA agreement

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)