IBRA to resume payment of interbank claims

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) plans to immediately resume payment of interbank claims on closed down banks that were suspended at the beginning of the Bank Bali scandal late in July, according to IBRA chairman Glenn S. Yusuf.

Glenn said on Tuesday that resuming the payment of the interbank claims was one of the short-term priorities of IBRA.

"If we don't continue the payment, the government's credibility will be questioned," he told reporters following a meeting with senior economic ministers.

He said that the agency was currently discussing this issue with the central bank.

The government has to pay the interbank claims on closed down banks because they are part of the government blanket guarantee program launched in January 1998.

The government has closed down some 50 banks since the blanket guarantee program was introduced. But so far it has not paid any interbank claims on closed down banks, except in the case of Bank Bali, which ended in scandal.

The Bank Bali scandal revolves around the transfer of Rp 546 billion in commission fees from the bank to private firm PT Era Giat Prima (EGP) for its services in helping the bank recoup Rp 904 billion in interbank claims on a closed down bank.

But IBRA has said Bank Bali should have not used the service of EGP because the interbank claims were guaranteed by the government.

PricewaterhouseCoopers said in its audit report into the scandal that there were numerous indicators of fraud, corruption and noncompliance during the processing and payment of Bank Bali claims.

Several senior government officials, including a deputy chairman at IBRA and businessmen close to former president B.J. Habibie, are believed to have been involved in the scandal.

Since the outbreak of the scandal the government has suspended payment of all interbank claims.

IBRA has assigned international auditor Ernst & Young to audit Rp 15 trillion in interbank claims made by 10 banks on closed down banks, to determine whether the claims are eligible under the government blanket guarantee scheme.

The Ernst & Young audit is expected to be completed by the middle of this month.

Banks have urged the government to immediately resume payment of the interbank claims because this would help the tight liquidity strain plaguing the industry.

Glenn also said another top priority for IBRA was to push ahead with the restructuring of bank nonperforming loans, which have slowed down following the Bank Bali scandal.

"This is very urgent," he said

IBRA is currently in control of over Rp 200 trillion of bank nonperforming loans. The agency has previously said that it's focusing on how to deal with 20 of the largest bad debtors.

There has been increasing concern that the agency is dragging its feet in restructuring the loans and is vulnerable to pressure from well-connected debtors.

Critics have demanded the agency be fully transparent in dealing with this restructuring process to help prevent the reoccurrence of a Bank Bali-style scandal.

Glenn also said the government was set to immediately recapitalize the publicly listed Bank Niaga.

He said that the total recapitalization cost of the bank was Rp 8.9 trillion.

"We are now only waiting for the government ruling to be issued on the recapitalization of Bank Niaga," Glenn said. (rei)