Duties of the Indonesian Bank Restructuring Agency – Sinaumed’s have you ever heard of the Indonesian Bank Restructuring Agency (IBRA)? This state institution was formed in 1998 based on Presidential Decree Number 27 of 1998 concerning the Establishment of IBRA. However, the performance of this state institution was considered not good until 27 February 2004 or six years after it was formed, IBRA was officially disbanded.
IBRA was dissolved during the reign of the 5th president, Megawati Soekarno Putri by issuing Presidential Decree Number 15 of 2004 concerning Termination of Duties and Dissolution of IBRA. A government agency formed to carry out efforts to revitalize banks, manage troubled assets and administer government guarantee programs (Indonesia Bank Restructuring Agency/IBRA).
History of IBRA
The Indonesian Bank Restructuring Agency (IBRA) was established on January 26, 1998 and is planned to carry out its duties within five years. IBRA’s liquidation took longer than planned and finally ended on April 30, 2004.
According to the decree establishing IBRA (Presidential Decree No. 27 of 1998) IBRA’s aim was to supervise, manage and restructure distressed banks. These objectives were extended on 27 February 1999 to include government asset management of banks under restructuring status and to optimize the rate of recovery for disposal of distressed bank assets.
During its operation, IBRA carried out a series of comprehensive activities consisting of bank liability programs, bank restructuring, bank loan restructuring, shareholder settlement and recovery of state funds. This is carried out by the main operating units within IBRA (Bank Restructuring, Credit Asset Management, Investment Asset Management, Risk Management and Support and Administration).
Initially, the establishment of IBRA was aimed at establishing a state institution in charge of banking restructuring, managing troubled assets settlement, seeking to recover state funds channeled to the banking sector, and administering the government guarantee program (Indonesian Bank Restructuring Agency/IBRA).
In fact, these tasks were not carried out properly, as seen by the many problematic banks at that time. IBRA is considered to have failed to solve banking problems as a task that should be carried out.
IBRA’s Journey to Disbandment
Even though it has been disbanded for a long time, there is nothing wrong with knowing the journey of this state institution from the time it was formed to its disbandment. This is because although in the end IBRA’s performance was deemed not good, this institution has succeeded in refunding state funds. As for IBRA’s journey since it was formed until it was disbanded:
The IBRA institution was formed in the midst of the 1998 monetary crisis with the main task of restructuring the banking system, settling problem assets and trying to recover state funds channeled to the banking sector. The government at that time did not say that there were unhealthy banks, but in fact many banks were in trouble.
In carrying out its mission, IBRA is provided with the authority which officially forms the operational legal basis in Presidential Decree No. 34 of 1998 concerning Duties and Authorities of the Indonesian Bank Restructuring Agency.
IBRA led by Glenn Yusuf then strengthened its organization with a special division, namely the Asset Management Credit (AMC) division to handle non-performing loans to banks that were closed or taken over by the government. The two Asset Management Investment (AMI) divisions are in charge of handling bank assets or bank owners. The value of all assets in the hands of AMC and AMI at that time reached Rp. 640 trillion.
September 1998-early 1999
Initially, IBRA’s performance was quite good, with Rp. 112.643 trillion from the hands of nine conglomerate owners of banks. IBRA succeeded in getting five conglomerate bank owners to commit themselves to a Master Settlement and Acquisition Agreement (MSAA) and four other bank owners to agree to a Master Refinancing and Notes Issues Agreement (MRA).
IBRA and the bank owners also agreed to form a holding company to manage the sale of assets. Apart from MSAA and MRA, IBRA has also established a debt acknowledgment (APU) scheme for entrepreneurs as another option. IBRA’s authority was later strengthened by Government Regulation no. 17 of 1999 concerning IBRA (PP 17/1999).
May 1999-December 2000
Looking brilliant at the start, IBRA experienced problems in the process of returning assets that should have been handled and sold, in fact they are still experiencing various obstacles. Starting from the completeness of the documents, the owner’s shares that have changed hands to the creditor.
In addition, there are differences in the valuation of the assets handed over to IBRA. The Salim Group, which on the auditor’s valuation, admits to having assets worth Rp. 52,667 trillion, it turns out that when due diligence was carried out by Holdiko, the asset value was no more than Rp. 20 trillion.
With efforts to transfer constrained assets, IBRA made a new policy as an effort to accelerate and optimize returns covering the areas of Asset Transfer Kit (ATK) settlement , Debt Restructuring and Sale of Collection Rights.
This method allows IBRA to sell directly and tender existing assets. This acceleration was also carried out because of the emergence of discourse on the dissolution of IBRA which was scheduled for 2004, because this institution was considered ineffective in carrying out its duties.
In the middle of 2002, Syafruddin A Temenggung who was the head of IBRA at that time was determined to expedite the dissolution of IBRA in 2003 or ahead of schedule. Acceleration called the 2003 IBRA soft landing .
This acceleration was followed by a program to sell 2,500 assets worth IDR 158 trillion simultaneously. Then, unsold assets will be managed by joint ventures, holding companies and clearing houses that specifically handle the exchange of assets and bonds.
Together with Commission V of the Indonesian House of Representatives, Syafruddin discussed the fate of the institution he leads. He complained that there was no support from government institutions for IBRA to carry out its duties. Government Regulation No. 17 specifically regulates the authority of IBRA in fact not much use in the field.
This can be seen from the 66 letters of confiscation issued against reduction assets, only three months which were won and successful confiscation was carried out. A month later in March 2003, IBRA presented a scenario for ending the state agency to officials from the Ministry of Finance.
27 February 2004
IBRA was officially dissolved by President Megawati and then appointed Boediono, Minister of Finance as Chair of the IBRA Management Team through Presidential Decree No. 16/2004 concerning the Establishment of IBRA Management Team, so this IBRA was officially dissolved.
Chairman of the Indonesian Bank Restructuring Agency (IBRA)
The IBRA chairmen are as follows:
- Bambang Subianto : January 1998-March 1998.
- Iwan Prawiranata : March 1998-22 June 1998.
- Glenn MS Yusuf: 22 June 1998-12 January 2000.
- Cacuk Sdarijanto: 12 January 2000-25 June 2001.
- Edwin Gerungan: 6 November 2000-25 June 2001.
- I Putu Gede Ary Suta: 25 June 2001-19 April 2002.
- Syafruddin Arsjad Temenggung : 19 April 2002-27 February 2004.
Bank Under Special Supervision
The national banking restructuring program has been implemented through steps including the establishment of the Indonesian Bank Restructuring Agency (IBRA), the government guarantee program and the banking recapitalization program. In its development, there are still banks that are considered to be experiencing difficulties which could endanger the continuity of their business or the national banking system.
So, banks need to take certain steps such as intensive supervision and special supervision so that a healthy banking system can be created effectively. For banks that still have prospects to become healthy, it is necessary to take steps to improve and revitalize the bank. Therefore, it is necessary to set clear and transparent requirements and criteria regarding the level of difficulty of the Bank in its business activities.
In addition, there are coordinating steps and mechanisms needed in the context of implementing national banking restructuring. Coordinating steps between Bank Indonesia and IBRA in the context of restructuring the national banking sector are included in a joint agreement between the Governor of Bank Indonesia and the Chairperson of IBRA.
In accordance with the banking recapitalization program, at the end of 2001 banks were required to meet a minimum capital adequacy ratio of equal to or greater than 8% (eight percent)
Supervision strategy by Bank Indonesia
In carrying out supervisory duties, Bank Indonesia determines several types of supervision based on an analysis of the condition of a particular bank, namely:
- Normal Supervision (Routine)
- Intensive Supervision
- Special Surveillance
In practice, Bank Indonesia also continues to oversee Banks in Restructuring (BDP) and monitors the settlement of Banks Frozen Business Activities (BBKU) and Banks in Liquidation (BDL) as stipulated by applicable laws and regulations.
Supervision Approach by Bank Indonesia
In carrying out the supervision strategy, the supervisory approach is divided into two types of activities, namely indirect supervision (off site supervision) and direct supervision (on site examination).
Indirect supervision is an act of supervision and analysis carried out based on regular reports (regulatory reports) submitted by the Bank, information in other forms of communication and information from other parties. In addition, direct supervision is carried out by carrying out inspections on the Bank to examine and evaluate the level of compliance of the Bank with the applicable regulations. Included in the two types of supervisory approaches above is an analysis of the Bank’s condition, now and in the future (forward looking).
This supervision is carried out on Banks that meet the criteria of not having potential or not endangering their business continuity. In general, the frequency of supervision and monitoring of bank conditions is carried out normally, while inspections of this type of bank are carried out periodically or at least once a year.
This intensive supervision is carried out by banks that meet potential difficulties that could endanger their business continuity. The steps taken by Bank Indonesia for Banks with Intensive Supervision status include:
- Request the bank to report certain matters to Bank Indonesia.
- Increasing the frequency of updating and evaluating work plans with adjustments to the targets to be achieved.
- Ask the bank to develop an action plan according to the problems faced.
- Placing Bank Indonesia supervisors and examiners at the Bank if necessary.
For a Bank under intensive supervision which does not result in an improvement in financial and managerial conditions based on Bank Indonesia’s analysis it is known that the Bank can be classified as a Bank having difficulties which could jeopardize its business continuity. Thus, the bank is designated as a Bank with special supervision status.
In addition, if the intensity of direct inspections at the Bank is required, supervision will usually be increased, especially in the context of monitoring performance developments based on the commitments and improvement plans submitted by the Bank’s management to Bank Indonesia.
Supervision of banks that are considered to be experiencing difficulties that endanger the continuity of their business. So, there are several actions taken by Bank Indonesia, including:
- Instruct Banks or Bank shareholders to submit a capital restoration plan in writing to Bank Indonesia.
- Ordered the Bank to fulfill the obligation to carry out mandatory supervisory actions.
- Ordering the Bank or the Bank’s shareholders to take actions including:
- Change the board of commissioners and directors of the Bank;
- Writing off loans or financing based on sharia principles that are classified as loss and calculating bank losses with bank capital;
- Performing mergers or consolidations with other banks;
- Selling a bank to a buyer who is willing to take over all of the bank’s obligations;
- Handing over the management of all or part of the bank’s activities to other parties;
- Selling part or all of the bank’s assets and liabilities to other banks or parties;
- Freezing certain bank business activities.
The prohibitions and restrictions for banks under special supervision, among others:
- Banks are prohibited from making capital distribution payments (dividend distribution or bonus distribution);
- Banks are prohibited from conducting transactions with related parties or other parties determined by Bank Indonesia;
- Banks are subject to asset growth restrictions;
- Banks are prohibited from making payments on subordinated loans;
- Banks are subject to compensation restrictions to related parties.
Banks are in rejuvenation
A bank can be determined as a bank in restructuring if the bank is considered to still have the potential to be repaired, especially from a capital aspect. During the bank restructuring process by IBRA, communication and cooperation between Bank Indonesia and IBRA were carried out intensively, especially with regard to developments in the main indicators of bank performance. These include capital performance, liquidity ratios (minimum statutory reserves), non-performing loans, prudential provisions (BMPK, PDN, PPAP) and indications of achievement of work plans.
If conditions improve and the restructuring program has been completed or declared successful, then the BDP status is revoked and the bank is returned to Bank Indonesia for the necessary supervision. Conversely, if the bank’s condition worsens, the status of the BDP may change to a Frozen Bank for Business Activities.
Frozen Bank Business Activities
Banks are determined as Banks with Frozen Business Activities if the bank fulfills the requirements that the bank’s condition has declined very sharply or IBRA’s restructuring program for Banks Under Restructuring (BDP) cannot be completed by the bank within the agreed timeframe or based on IBRA’s considerations. The rehabilitation program cannot be carried out even though the agreed timeframe has not been exceeded.
Then, in the case that IBRA has completed carrying out the necessary steps for the settlement of a bank with BBKU status, the next settlement will be the revocation of the business license, the dissolution of the legal entity and the liquidation of the bank.
So, that’s about the history, duties, and journey of the Indonesian Bank Restructuring Agency (IBRA), yes Sinaumed’s. If Sinaumed’s is still confused, and needs related references about the complete history, duties, and journey of the Indonesian Bank Restructuring Agency, you can visit sinaumedia’s book collection at sinaumedia.com . I hope this article inspires you!
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Author: Rosyda Nur Fauziyah