SCB denies conspiring with IBRA over Bank Bali

JAKARTA (JP): London-based Standard Chartered Bank (SCB) denied accusations by former Bank Bali president Rudy Ramli that it conspired with the Indonesian Bank Restructuring Agency (IBRA) to take over the scandal hit Bank Bali.

The take over was ordered by Bank Indonesia after the British bank informed IBRA its due diligence audit of Bank Bali uncovered two questionable transactions by the bank's management.

SCB said it found large interbank loans which were guaranteed by IBRA written off in Bank Bali's June accounts. This accounts for the payment of Rp 546 billion to PT Era Giat Prima (EGP) by Bank Bali for its help in retrieving some Rp 3 trillion in loans from three closed banks.

The second questionable action was Bank Bali's attempt to sell a package of large bad loans, which should have been transferred to IBRA under the recapitalization program.

In a hearing with the House of Representatives last week, Rudy accused SCB of using its own accounting standards in its due diligence audit, resulting in Bank Bali's recapitalization costs increasing significantly.

By marking up the recapitalization costs, SCB was able to buy Bank Bali shares at reduced prices, Rudi said at the hearing.

SCB denied the charge, saying the due diligence audit carried out by public accounting firm KPMG was conducted according to Bank Indonesia's standards.

The increase in recapitalization costs was a result of the further deterioration of the quality of Bank Bali's loan portfolio, it said.

In its due diligence audit, KPMG estimated Bank Bali's recapitalization costs at Rp 4.3 trillion, much higher than the Rp 2.5 trillion estimate of its March audit.

KPMG audited the bank in March on the behalf of Bank Indonesia, while in July it audited Bank Bali at the behest of the British bank.

SCB also said that until Bank Bali was recapitalized through a rights issue, there were likely to be continuing operating losses which needed to be included in the recapitalization amount for the months of April to October.

Bank Bali's payment to EGP would have increased the recapitalization cost to Rp 4.8 trillion from Rp 4.3 trillion if it was not identified by Standard Chartered, it added.

SCB said that with the prompt take over of Bank Bail by Bank Indonesia, the sale of assets could be prevented and the interests of the government protected.

The IBRA entered into a strategic partnership with Standard Chartered Bank in July, whereby the SCB will head Bank Bali's new management team.

Bank Bali will soon offer a rights issue to raise some Rp 4.3 trillion to lift its capital adequacy ratio (CAR) to the government-set 4 percent minimum.

IBRA also signed an investment agreement with Standard Chartered, allowing the British bank to purchase part of the rights issue and take a 20 percent stake in Bank Bali, while IBRA would purchase the remaining rights shares. (02)