The buying of IBRA's credit

The banking crisis in 1997 was followed by the transfer of non-performing loans worth hundreds of trillions of rupiahs to the Indonesian Bank Restructuring Agency (IBRA), in the hope that the bad credits would be restructured first by the agency before they are returned to concerned banks.

IBRA has since last year sold its already-restructured credit assets through some programs of the Corporate Core Asset Sales. Some of the credit assets had been bought by banks.

The number of credit assets restructured by IBRA however, is very small compared to the volume of credit assets the agency has been managing.

No wonder IBRA has since mid-2002 sold some credit assets which have yet to be restructured. The biggest non-performing credit asset sold through the Credit Asset Selling Program (PPAK) was worth Rp 135 trillion.

It can be said that most of IBRA's credit assets, including the unrestructured ones, have been returned to the banks as 70 percent of PPAK buyers were local investors and banks.

To refrain from running into (the central bank) Bank Indonesia's policy on non-performing credit assets, some banks along with security companies and investment managements have formed consortium.

Hence, it is better for the central bank, IBRA and the banks to have a dialog on their interests in the business. The banks should be allowed to buy IBRA's credit assets without ignoring the principle of prudent banking. -- Bisnis Indonesia, Jakarta