Wed, 05 Mar 2003

IBRA plans to dismiss Bank Lippo management

Dadan Wijaksana, The Jakarta Post, Jakarta

The Indonesian Bank Restructuring Agency (IBRA) confirmed on Tuesday that a reshuffle in the management of publicly listed Bank Lippo would likely be one of the main items on the agenda of the bank's extraordinary meeting of shareholders.

"We're still reviewing all the items to be included in the agenda, including plans to replace the management," said IBRA deputy chairman I Nyoman Sender.

His remarks supported an earlier statement by IBRA Chairman Syafruddin Temmenggung, who had called for the meeting to discuss the future of Bank Lippo's management, following months of public frenzy over its alleged wrongdoings.

IBRA is the majority owner of Bank Lippo with a 59 percent stake, following a government-sponsored bailout of the bank in the wake of the late-1990s financial crisis.

Pressure has been rising to punish the management and the bank's former owner, who have been accused of committing intentional fraud to deteriorate the bank's capital, as well as its share price. It was suspected these maneuvers were part of a plan to allow the Riady family -- the former owner -- to reclaim control of the bank.

Public outcry started to surface late last year when the bank issued two different financial reports. In its November version, the bank reported a net profit of Rp 99 billion (US$11 million) as of September, and a 24.8 percent capital adequacy ratio (CAR).

Only a month later, it reported completely different figures of Rp 1.27 trillion in losses and of a decrease in its CAR to around 4 percent, primarily due to a rapid decline in the value of its foreclosed assets.

However, the reason for the drop in its CAR only raised more questions, because the property sector -- from which most of the foreclosed assets came -- is currently enjoying a steady rise in terms of demand and price.

This further prompted the allegation of fraud, with critics saying the suspect maneuvers could only aim to justify the bank's plans for a rights issue.

A rights issue, which involves issuing new shares to obtain fresh capital, would cause a dilution in IBRA's shares, plus it would clear the way for the bank's former owner to buy back the shares at a much lower price.

Under the current price, the government's ownership in the bank is worth around Rp 600 billion only, compared to around Rp 6 trillion the government had to inject into the bank in 1999 under the recapitalization program.

As to the exact timetable for the meeting, Nyoman said that it would probably take place sometime next month, after it had received input from the Capital Market Supervisory Body (Bapepam) and the Ministry of Finance.

The two institutions are now investigating the accusations regarding Bank Lippo's management.

While Bapepam focuses its probes on the dual financial reports, the Ministry of Finance centers it on possible involvement of three appraisal firms and one auditor that had been appointed to appraise assets and audited its financial condition.

In the latest developments, Bapepam chairman Herwidayatmo told reporters on Tuesday that the capital market watchdog would announce the results of the probe by March 17.

If found guilty under the capital market law, the management could face up to 10 years imprisonment and a maximum fine of Rp 300 billion for providing misleading information to the public.