Indonesian Bank Restructuring Agency

Last updated

The establishment of the Indonesian Bank Restructuring Agency (IBRA) (Indonesian : Badan Penyehatan Perbankan Nasional, BPPN), lit. "National Banking Revitalization Agency") in early 1998 was one of a series of steps taken by the Indonesian government, in agreement with the International Monetary Fund on 15 January 1998, in response to the banking and economic crisis which emerged following the onset of the Asian monetary crisis in mid-1997. [1] Among other things, the drastic depreciation of the rupiah (Rp) reduced bank liquidity, and loss of public confidence in the rupiah and the banking system in general.

Contents

In establishing IBRA, the Indonesian authorities were effectively establishing a "bad bank" financial vehicle to allow the segregation of bad debts away from established banks with the aim of promoting the overall recovery of Indonesia's financial system. [2]

As a measure to cope with the scarcity of liquidity in the nation's banking system, in late 1997 and early 1998 the central bank (Bank Indonesia), as a lender of the last resort, provided liquidity assistance loans to banks. In addition, the Government instituted a blanket guarantee program for all bank liabilities, to arrest further erosion of confidence towards the system. This process left the Indonesian banking system holding a large number of bad loans at the end of 1997.

History

Establishment

IBRA was established on 26 January 1998 (based on the Presidential Decree No 27 year 1998) [3] and was planned to have lifespan of five years in order to undertake its tasks. In the event, IBRA's liquidation took longer than planned and the Agency was finally terminated on 30 April 2004. According to the decree establishing IBRA (Presidential Decree No. 27 Year 1998), IBRA's objectives were to administer the government's blanket guarantee program, and to supervise, manage and restructure distress banks. These objectives were extended on 27 February 1999 to include managing the government's assets in performing banks under restructuring status and to optimize the recovery rate of asset disposals of distressed banks. IBRA undertook a comprehensive series of activities consisting of bank liability program, bank restructuring, bank loan restructuring, shareholders settlement, and the recovery of state funds. These were carried out by the major operating units within IBRA (Bank Restructuring, Asset Management Credit, Asset Management Investment, Risk Management, and Support and Administration).

IBRA was supervised by the Ministry of Finance, the Financial Sector Policy Committee (FSPC) and the Oversight Committee. A Financial Sector Policy Committee (FSPC/Komite Kebijakan Sektor Keuangan) was formed on 21 August 1998 whose members included the main economic ministers of Indonesia, and the Independent Review Committee (IRC), which includes representatives from International Monetary Funds (IMF), the World Bank and Asian Development Bank (ADB).

Controversy

During the period of the existence of the Agency, IBRA had a troubled record. [4] The Agency was criticized for being slow in implementing its tasks of restructuring, for lack of transparency, and for alleged irregulatories. [5] There was also considerable controversy surrounding its operations, including the salaries of senior staff which were said to be very high. [6] One of the most known controversy of the IBRA is the Bank Bali Scandal where Golkar Party officials colluded with the IBRA and businessman Rudy Ramli to pay an illegal commission in which part of the fund is used for B.J Habibie re-election bid.

Leadership

One main problem for the Agency was that, partly because of period of political instability that Indonesia passed through after the fall of President Suharto in May 1998, there were numerous changes in leadership (of the Ketua or the chair) of IBRA. During the six years of IBRA's operations, there were a total of seven heads of the Agency.

Heads ("Ketua") of IBRA 1998-2004

NoNameStartFinishMonths
1 Bambang Subianto Jan 1998Mar 19982
2Iwan PrawiranataMar 199822 Jun 19983
3Glenn S. Yusuf22 Jun 199812 Jan 200019
4Cacuk Sudarijanto12 Jan 20006 Nov 200010
5Edwin Gerungan6 Nov 200025 Jun 20017
6I Putu Gede Ary Suta25 Jun 200119 Apr 200210
7Syafruddin Arsjad Temenggung19 Apr 200227 Feb 200422

Closure

When the Agency was finally closed at the end of April 2004, [7] the head of Indonesia's Supreme Audit Agency, Billy Joedono was cautious about reaching conclusions about the performance of IBRA. Before submitting a report to the Indonesian Parliament, Billy Joedono noted that IBRA appeared to have done its job in restructuring the majority of troubled banks but nevertheless left further conclusions about the performance of IBRA to the Parliament. [8] '

See also

Related Research Articles

<span class="mw-page-title-main">Economy of Cameroon</span>

The economy of Cameroon was one of the most prosperous in Africa for a quarter of a century after independence. The drop in commodity prices for its principal exports – petroleum, cocoa, coffee, and cotton – in the mid-1980s, combined with an overvalued currency and economic mismanagement, led to a decade-long recession. Real per capita GDP fell by more than 60% from 1986 to 1994. The current account and fiscal deficits widened, and foreign debt grew. Yet because of its oil reserves and favorable agricultural conditions, Cameroon still has one of the best-endowed primary commodity economies in sub-Saharan Africa.

<span class="mw-page-title-main">Federal Reserve</span> Central banking system of the US

The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of financial panics led to the desire for central control of the monetary system in order to alleviate financial crises. Over the years, events such as the Great Depression in the 1930s and the Great Recession during the 2000s have led to the expansion of the roles and responsibilities of the Federal Reserve System.

<span class="mw-page-title-main">Economy of Indonesia</span>

The economy of Indonesia is a mixed economy with dirigiste characteristics, and it is one of the emerging market economies in the world and the largest in Southeast Asia. As an upper-middle income country and member of the G20, Indonesia is classified as a newly industrialized country. Indonesia nominal GDP reached 20.892 quadrillion rupiah in 2023, it is the 16th largest economy in the world by nominal GDP and the 7th largest in terms of GDP (PPP). Indonesia's internet economy reached US$77 billion in 2022, and is expected to cross the US$130 billion mark by 2025. Indonesia depends on the domestic market and government budget spending and its ownership of state-owned enterprises. The administration of prices of a range of basic goods also plays a significant role in Indonesia's market economy. However, micro, medium and small companies contribute around 61.7% of the economy and significant major private owned companies and foreign companies are also present

<span class="mw-page-title-main">1997 Asian financial crisis</span> Financial crisis of many Asian countries during the second half of 1997

The 1997 Asian financial crisis was a period of financial crisis that gripped much of East and Southeast Asia during the late 1990s. The crisis began in Thailand in July 1997 before spreading to several other countries with a ripple effect, raising fears of a worldwide economic meltdown due to financial contagion. However, the recovery in 1998–1999 was rapid, and worries of a meltdown quickly subsided.

<span class="mw-page-title-main">Indonesian rupiah</span> Official currency of Indonesia

The rupiah is the official currency of Indonesia, issued and controlled by Bank Indonesia. Its name is derived from the Sanskrit word for silver, rupyakam (रूप्यकम्). Sometimes, Indonesians also informally use the word perak in referring to rupiah in coins. The rupiah is divided into 100 cents, although high inflation has rendered all coins and banknotes denominated in cents obsolete.

<span class="mw-page-title-main">Fractional-reserve banking</span> System of banking

Fractional-reserve banking is the system of banking in all countries worldwide, under which banks that take deposits from the public keep only part of their deposit liabilities in liquid assets as a reserve, typically lending the remainder to borrowers. Bank reserves are held as cash in the bank or as balances in the bank's account at the central bank. Fractional-reserve banking differs from the hypothetical alternative model, full-reserve banking, in which banks would keep all depositor funds on hand as reserves.

<span class="mw-page-title-main">Bank Mandiri</span> Indonesian bank

PT Bank Mandiri (Persero) Tbk or Bank Mandiri, headquartered in Jakarta, is the largest bank in Indonesia in terms of assets, loans and deposits. Total assets as of 2022, were 1.992 Trillion rupiah. As of 2022, Bank Mandiri is the largest bank in Indonesia by total assets.

<span class="mw-page-title-main">Bank of Korea</span> Central bank of South Korea

The Bank of Korea is the central bank of South Korea and issuer of South Korean won. It was established on 12 June 1950 in Seoul, South Korea.

<span class="mw-page-title-main">Fall of Suharto</span> 1998 Indonesian presidential resignation

Suharto resigned as President of Indonesia on 21 May 1998 following the collapse of support for his 32-year long presidency. Vice President B. J. Habibie took over the presidency.

<span class="mw-page-title-main">Tommy Suharto</span> Indonesian businessman and politician

Hutomo Mandala Putra, commonly known as Tommy Suharto, is an Indonesian businessman and politician. The youngest son of Suharto, the second President of Indonesia, he has long had a reputation of nepotism, corruption, and being a playboy. He gained notoriety for orchestrating the assassination of a judge who convicted him of corruption. He was convicted of murder in 2002 and sentenced to 15 years imprisonment, but was paroled in under four years.

<span class="mw-page-title-main">Bank Central Asia</span> Indonesian bank

PT Bank Central Asia Tbk, commonly known as Bank Central Asia (BCA) is an Indonesian bank founded on 21 February 1957. It is the largest private bank in Indonesia with assets amounting to Rp 5.529,83 trillion as of 2022. It is headquarters at BCA Tower in Jakarta.

<span class="mw-page-title-main">Financial Supervisory Service (South Korea)</span> South Korean supervisory agency on financial regulation

The Financial Supervisory Service (FSS) is South Korea's integrated financial regulator that examines and supervises financial institutions under the broad oversight of the Financial Services Commission (FSC), the government regulatory authority staffed by civil servants.

<span class="mw-page-title-main">CIMB Niaga</span> Indonesian company

PT Bank CIMB Niaga Tbk is Indonesia's sixth largest bank by assets, established in 1955. CIMB Niaga, which is majority-owned by CIMB Group, is the largest payment bank in terms of transaction value under the Indonesian Central Securities Depository. With 11% of market share, CIMB Niaga is the third largest mortgage provider in Indonesia.

<span class="mw-page-title-main">J. Soedradjad Djiwandono</span> Indonesian economist

J. Soedradjad Djiwandono is an Indonesian economist who was the Governor of Bank Indonesia, the nation's central bank, from 1993 until his sudden dismissal in 1998.

<span class="mw-page-title-main">Permata Bank</span> Indonesian company

Permata Bank is a bank in Indonesia, headquartered in the capital city Jakarta. It has officially become a BUKU IV bank after receiving confirmation from the Financial Services Authority (OJK) on 20 January 2021. Serving nearly four million customers in 62 cities of Indonesia, it has 304 branch offices and two mobile branches. Currently, the bank is led by Meliza Musa Rusli as the CEO.

From the 1991 India economic crisis to its status of third largest economy in the world by 2011, India has grown significantly in terms of economic development, so has its banking sector. During this period, recognizing the evolving needs of the sector, the Finance Ministry of the Government of India set up various committees with the task of analyzing India's banking sector and recommending legislation and regulations to make it more effective, competitive and efficient.

The Bank Bali scandal occurred in Indonesia in 1999 when Golkar Party officials colluded with the Indonesian Bank Restructuring Agency (IBRA) to coerce Bank Bali chief Rudy Ramli to pay an illegal commission of Rp546 billion to private company Era Giat Prima in order to collect Rp904.6 billion owed by two banks taken over by IBRA.

Beddu Amang was an Indonesian economist. He served as the head of the State Logistics Agency (Bulog) from 1995 to 1998. Born and raised in South Sulawesi, Beddu migrated to Yogyakarta and finished his university education at the Gadjah Mada University.

<span class="mw-page-title-main">Bambang Subianto</span> Indonesian economist and politician (1945–2022)

Bambang Subianto was an Indonesian academic and technocrat who served as Minister of Finance from 1998 to 1999. Before assuming the post of finance minister, Bambang worked in the Department of Finance for about a decade.

References

  1. IMF, Statement by the Managing Director on the IMF Program with Indonesia', 15 January 1998.
  2. Details of the process of bank restructuring following the Asian financial crisis in Indonesia are in Yuri Sato, 'Bank Restructuring and Financial Institution Reform in Indonesia' Archived 19 December 2016 at the Wayback Machine , The Developing Economies, XLVIII(1), March 2005, pp. 91-120.
  3. Keputusan Presiden Republik Indonesia Nomor 27 Tahun 1998 (Presidential Decree No 27 of 1998).
  4. Wayne Arnold, 'Indonesian Bank Agency Fading Our', International New York Times, 2 October 2003, and Reiner S., 'IBRA disappoints ahead of early closure next year' Archived 3 July 2019 at the Wayback Machine , The Jakarta Post, 27 December 2002.
  5. 'IBRA to be audited soon, says Bambang', The Jakarta Post, 23 November 1999.
  6. 'IBRA bashing', The Jakarta Post, 30 January 2004.
  7. Presidential Decree No 15 of 2004 formally closing the Agency was signed on 27 February 2004.
  8. Tony Hotland, 'IBRA did job, but success unclear, says audit agency', The Jakarta Post, 8 May 2004.