IBRA plans to dismiss Bank Lippo management

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.