IBRA pessimistic on bad bank loans

IBRA pessimistic on bad bank loans

JAKARTA (JP): The banking sector's huge number of non-
performing loans (NPLs) cannot be fully recovered due to the
severity of the economic crisis that has plagued the country
since the middle of last year, according to a key official of the
Indonesian Bank Restructuring Agency (IBRA).

IBRA's asset management unit director Eko Budianto said on
Wednesday that the rupiah would have to strengthen to Rp 3,000 to
the U.S. dollar -- a level deemed impossible -- in order for the
banks to fully recover the NPLs.

"We just have to be realistic," he told reporters on the
sidelines of a seminar on banking when asked whether all the bad
loans could be salvaged.

He said IBRA's mission was to recover as many bad loans as
possible and minimize the cost of doing so.

The rupiah closed at Rp 8,800 to the dollar on Wednesday. It
hit its lowest ever level, of 17,000 to the dollar, in January,
falling from Rp 2,450 in July last year before the crisis
started.

IBRA was set up by the government early this year with a
mission to recover the central bank's liquidity support given to
troubled banks and to help restructure the ailing banking
industry.

Under the government's bank recapitalization plan, IBRA's
asset management unit will absorb all the bad loans of the
recapitalized banks.

Some analysts estimate the NPLs account for 50 percent of the
more than Rp 600 trillion in banks' outstanding credit.

Analysts have said that salvaging the NPLs would require a
recovery in the real sector which has been badly hit by the
current high interest rate environment.

Eko said that another problem hindering recovering the NPLs
was the legal hurdle of selling debtors' assets given as
collateral.

He pointed out that the transfer of collateral assets
belonging to publicly listed companies to IBRA required approval
from the minority shareholders. (rei)