BPPN

The establishment of the Indonesian Bank Restructuring Agency (IBRA) (Indonesian: Badan Penyehatan Perbankan Nasional (BPPN)) 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. 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.

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.

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.

IBRA was established on 26 January 1998 (based on the Presidential Decree No 27 year 1998) 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 optimise 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).

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