IBRA wants a say in BLBI talks
M. Taufiqurrahman, The Jakarta Post, Jakarta
Chairman of the Indonesian Bank Restructuring Agency (IBRA) Syafruddin Temenggung demanded that his agency be included in the current talks to seek a burden-sharing mechanism between the central bank and the finance ministry over the huge debts from the Bank Indonesia liquidity support facility (BLBI).
He feared that if the agency was not given a chance to make itself heard in the talks, IBRA could end up being solely accountable for failing to recoup the Rp 144.5 trillion (US$16.23 billion) worth of BLBI loans handed out by the central bank in the late 1990s to bailout troubled banks.
Speaking during a hearing with the House of Representatives Commission IX on financial affairs on Thursday, he said that IBRA had received from the central bank promissory notes issued by the borrowers. But the notes had not been backed up by sufficient collateral, making it impossible for the agency to recoup at least 70 percent of the loans, as demanded by the law.
He said that according to an audit by the Supreme Audit Agency (BPK) the value of the promissory notes was only worth around Rp 12 trillion.
The central bank, at the request of the government, distributed the BLBI loans during the banking crisis period, and the borrowers were said to have provided enough collateral. It turned out that most of the money, around Rp 138 trillion, was misused by the bank owners and the collateral has not proven to be recoverable. Such misuse and lack of collateral has created a situation wherein the government, specifically the finance ministry, is now unwilling to fully cover the debts, putting the independent central bank in a difficult position.
The central bank and the finance ministry have recently agreed on a burden-sharing mechanism, under which the finance ministry would issue capital maintenance notes to Bank Indonesia, which would only receive interest for the notes if its capital ratio falls below 5 percent. If the capital ratio is above 5 percent, the excess can be used to cut the government debt to the central bank. However, the House has yet to approve the deal.