Plan to let IBRA debtors walk slammed

The Jakarta Post, Jakarta

A plan by the Indonesian Bank Restructuring Agency (IBRA) to drop criminal charges against ex bankers who misused trillions of rupiah in central bank assistance funds has raised the hackles of legal experts and economists.

Noted lawyer Todung Mulya Lubis said that ex bankers who paid off their debts to IBRA should still face criminal charges for breaching banking regulations and misusing Rp 138 trillion (around US$15.28 billion) in Bank Indonesia liquidity support funds.

"Letting them (the bankers) off the hook would be a problematic decision that would draw major resistance from the public," Todung told The Jakarta Post on Tuesday.

He was commenting on IBRA's plan to drop criminal charges against debtors if they repaid their debts to the agency.

IBRA said on Monday that it was recommending the no criminal prosecutions be taken against four debtors it said had been cooperative in settling their debts.

The proposal came as the shareholder settlement program, under which the ex bankers agreed to pay their debts in return for not facing prosecution, nears its expiry date for most of the program's 35 debtors.

Following the 1997 economic crisis, their banks drew heavily on central bank loans to ward off massive bank runs.

But nearly all of the money was used for purposes other than repaying customer deposits, with much of the money being, in fact, used for speculating on the U.S. dollar.

Most conglomerate-owned banks also channeled more than 20 percent of their loans to affiliated companies in violation of Bank Indonesia's legal lending limit regulations.

Allowing them now to avoid criminal charges was meant as an incentive to extract the highest recovery rate from the debtors.

Drawn up in 1998, the shareholder settlement program, however, has since become a source of controversy amid minimal repayments by the debtors, and charges they were attempting to regain control over the assets they had surrendered to IBRA as part of their debt-settlement deals.

International Monetary Fund (IMF) executive director for the Southeast Asian region Sri Mulyani Indrawati said that whatever the government decided to do, it must ensure it optimized repayments from the ex bankers.

"If we lend them trillions of rupiah and only get a few billion back in return, it means the government is shouldering the loss," the former University of Indonesia economist said after meeting Vice President Hamzah Haz on Tuesday.

But IBRA chairman Syafruddin Temengung said the government must abide by the settlement program to ensure legal certainty.

The government has yet to decide who will have the final say on the dropping of criminal charges. Syafruddin said it would likely be the coordinating minister for the economy and the Attorney General's Office.

Economist Umar Juoro of the Center for Information and Development Studies (CIDES) urged the government to verify debtor compliance under the shareholder settlement program.

"We have a legitimate audit institution, which is the Supreme Audit Agency (BPK)," he said, adding that this was crucial as most of the assets the debtors had surrendered had declined in value.

Whatever the outcome, the shareholder settlement program itself has often been described by legal experts as favoring debtors. The program consists of three types of settlements.

The most controversial of these is the Master of Settlement and Acquisition Agreement (MSAA) mechanism. These agreements have been signed by the country's largest conglomerates.

The other two are the Deed of Indebtedness (APU) mechanism and the Master of Refinancing and Notes of Issuance Agreement (MRNIA) mechanism.

IBRA plans to release and discharge from their obligations two APU debtors, who owned Bank Budi and Bank Dana Internastonal respectively, and two MSAA debtors, Sudwikatmono of Bank Subentra and Ibrahim Risyad of Bank Risyad Salim International.