3rd Forum on Asian Insolvency Reform (FAIR) I B R A The Indonesian Bank Restructuring Agency 3rd Forum on Asian Insolvency Reform (FAIR) Seoul, Korea, 10-11 November 2003

Agenda : Overview Performance to Date Plans for Going Forward Economic Crisis and Banking Sector Vision & Mission IBRA's Scheme Performance to Date Macro Economic Indicators Indonesian Banking Landscape Pre and Post Crisis Bank Restructuring Unit (BRU) Asset Management Credit (AMC) Asset Management Investment (AMI) Contribution to Fiscal Support Plans for Going Forward Economics Policy Package after IMF Termination Recently Closed Transactions Timeline of Remaining Disposal Programs in 2003 Lippo Bank & BII Disposal Plan Investment Asset Disposal Program (PPAI 3) Closure of IBRA

Plans for Going Forward Performance to Date Overview Economic Crisis and Banking Sector Vision & Mission IBRA's Scheme

Economic Crisis and Banking Sector Economic Crisis: started with drastic devaluation of Rupiah, followed by banking and economic crisis In mid 1997 Rupiah drastically depreciated following the depreciation of regional currencies Rupiah depreciation led to liquidity crisis and in turn banking crisis Banking crisis led to Bank Run (Rush) Government Response In order to install trust in the banking system, the government issued blanket guarantee program In order to prevent capital flight, very high interest policy was put in place that led to the collapsed of the real sector Lender of the last resort function of The Central Bank was executed IBRA was established in January 1998

To build a strong Government Agency IBRA Vision To build a strong Government Agency in supporting the Indonesian economic recovery Bank Restructuring and Divestment Loan Restructuring and Disposal Shareholder Asset Settlement Consolidate, restructure, and divest IBRA administered banks. Support Government in preparation for the establishment of Financial Services Authority and Deposit Insurance Corporation. Conduct Loan Assets Sales Program (PPAK). Finalize ATK administration problem. Accelerate restructuring and follow up litigation cases. HoldCos establishment process and/or asset securitization process. Shareholder settlement of frozen banks, closed banks and taken over banks (BBO, BBKU, BTO). Former shareholders assets possession by IBRA Continue asset sales of former shareholders. IBRA Mission To promote economic recovery through banking sector and corporate debt restructuring and to optimize the recovery of government funds in order to alleviate the burden of the recapitalization bonds on the Government budget

Shareholder Settlement Bank Shares Divestment Marketable Securities IBRA's Scheme BI Liquidity Assistance Rp. 144.5 T Recap Bonds Rp. 425.5 T Guarantee Rp. 73.8 T MoF Advancement Rp. 4.9 T FAILED BANK "Non IBRA Affairs" Shareholder Settlement Program Non Performing Loan Bank Shares I B R A "IBRA Affairs" Shareholder Settlement Investment Bank Shares Divestment Interbank NPL Non Core Asset NPL Marketable Securities AMI BRU AMC Litigation Treasury Rp. 130.72 T Rp. 123.34 T Rp. 361.19 T Rp. 65.81 T Rp. 13.50 T Notes : as of August 2003 (Finance Accounting)

Plans for Going Forward Performance to Date Overview Indonesian Macro Economic Indicators Indonesian Banking Landscape Pre & Post Crisis Bank Restructuring Unit (BRU) Asset Management Credit (AMC) Asset Management Investment (AMI) Contribution to Fiscal Support

Source: Bank Indonesia Indonesian Macro Economic Indicators ….inflation rate is decreasing significantly after 1997 economic crisis ... … while exchange rate is stabilizing continuously … short term interest rate is steadily declining ... … interest rate spread is moving from negative during the crisis to positive spread ... Source: Bank Indonesia

The Commercial Banks in Indonesia Indonesian Banking Landscape Pre and Post Crisis Massive bank runs and loan defaults forced closure of commercial banks 72 banks failed, then administered by IBRA The Commercial Banks in Indonesia Number of banks Banks under IBRA Number of banks 238 72 52 164 151 JV and foreign 44 Foreign 40 10 Public domestic JV 34 38 15 43 46 3 Private domestic 160 81* 57 2 1997 1999 2000 Failed Banks Closed Recap & Merged to Danamon and PermataBank Recap- italized BCA Niaga *Almost half of private domestic banks were either closed or taken over by the government

Bank Restructuring Unit Banks Indicators under IBRA …..in general, banks performance have been improving, especially on CAR, NPL and LDR.... Berdasarkan tiga indikator bank (CAR, NPL dan LDR) menunjukan pada akhir tahun 2002 bank-bank rekap di bawah kelolaan BPPN menunjukkan kinerja yang sehat dan rata-rata terus mengalami perbaikan. Memang saat ini penerimaan bunga dari bank-bank rekap sebagian berasal dari Obligasi rekapitalisasi, namun sejauh ini bank-bank tersebut terus meningkatkan penerimaannya dari kredit kepada pihak ketiga, hal ini terlihat dengan adanya peningkatan LDR (meskipun belum maksimal) dari Bank-bank tersebut. Usaha ini juga sekaligus secara bertahap menurunkan ketergantungan pendapatan bank dari Obligasi rekapitalisasi. After BCA, Bank Niaga in April and November 2002, and Bank Danamon in July 2003, IBRA is currently proceeding with divestment of Bank Lippo and Bank Internasional Indonesia. Note : - June 2003 figures are unaudited report

Bank Restructuring Unit Divestment of IBRA’s Bank Shares …..The divestment of IBRA’s majority bank shares at BCA, Niaga Bank and Danamon Bank to Strategic Investor was mainly intended for continuous improvement of those Banks’ performance

Core Asset by type of obligor

Core Asset by Line of Business

Asset Management Credit Loan Disposal (IDR. Trillion) CLS : Corporate Loan Sale CCAS : Corp. Core Asset Sale CULS : Corp. Unrestructured Loan Sale PPAK : Loan Asset Disposal Program PPAK - PPL : Loan Asset Disposal Prog. - Direct Selling Program P3AK : Loan Asset Portfolio Disposal Program PPAS : Strategic Asset Disposal Program

Asset Management Investment Equity Divestiture

Contribution to Fiscal Support Since FY 1999/2000 ‘til 2002 IBRA always able to meet its fiscal target ... … FY 2000 (9-mo), 2001 and 2002 IBRA even surpassed the target Note : IBRA’s achievement in 2003 is per Sept 2003

Plans for Going Forward Performance to Date Overview Economics Policy Package after IMF Termination Recently Closed Transactions Timeline of Remaining Disposal Programs in 2003 Lippo Bank & BII Disposal Plan Investment Asset Disposal Program (PPAI 3) Closure of IBRA

Economic Policy Package after IMF Termination IBRA’s Tasks Financial Safety Net The Establishment of Deposit Insurance Agency (LPS) Bank Divestment & Other Asset Disposal Programs Divestment of IBRA's Majority Bank Shares Divestment of Credit Assets, Equity and Quasi Equity (PPAS & PPAK) Divestment of Property Assets (PPAP) Divestment of Share Holder’s Assets (PPAI)

Recently Closed Transactions Loan Asset Disposal Program (PPAK 4) 26 Sept Block Sale 20% of Bank Niaga shares 16 Sept Strategic Asset Sale Program (PPAS) 2 19 Sept Investment Asset Sales Program (PPAI) 3 Batch 1 24 Sept Treasury Asset (PPSBM) 3 17 Sept

Timeline of Remaining Disposal Programs in 2003 2004 June July Aug Sept Oct Nov Dec Jan Feb 51% share divestment of Bank Lippo Conclude all remaining transactions & prepare for IBRA closure 51% share divestment of Bank BII Investment Asset Sales Program 3 (Batch 2 : Share & Receivable) Property Asset Sales Program 4 (Batch 1 - Batch 5) Ongoing JV Property

Investment Asset Disposal Program (PPAI 3) The offered assets in Investment Asset Disposal Program Phase 3 (‘PPAI 3) are mostly Shares,Convertible Bond, Receivables in companies and Properties directly or indirectly owned by IBRA Assets Offered on PPAI 3 Batch 2

Bank’s Shares Disposal Program IBRA plans to dispose its 52.04% stake in Bank Lippo via strategic sale and 71% of its shares in BII via strategic sale (51%) and market placement (20%) Strong in trade financing and consumer banking (card business) BII is one of the leading credit card operator in Indonesia (currently aggregates to over 450.000 and controls 30% of market share) and is well positioned to become one of the leading domestic consumer banking franchise (customer base in excess of 2 million) The best funding structure in the industry. Its low-cost fund (checking and saving accounts) comprised 70% of its total funding, compared to the industry average at 40% Bank Lippo enjoyed low-cost of fund from its checking and saving accounts. One of the leading ATM service providers in Indonesia with a network of over 600 ATMs

Ongoing Joint Venture Program for Property IBRA plans to dispose its property assets in several main locations in Jakarta and Surabaya via Joint Venture program, during October 2003 - January 2004

Recovery of State Funds Administration of Deposit Insurance Program Closure of IBRA IBRA's Task Achievement and Future Plan IBRA'S Task Achievement Near Future Plan Bank Restructuring No more Recapitalization Program Most of the Bank Divestment Programs are Completed. Minority Ownership at banks Establishment of Holding Companies to Manage Remaining Assets of IBRA Asset Settlement 50% of Asset has been Restructured The Remaining Assets still 20% Recovery of State Funds Accumulated Contribution (Cash & Bond) is IDR 140 trillion Administration of Deposit Insurance Program No More Banks Closed for the last two years No More New Claims Establishment of Deposit Insurance Agency

Property Compaies Equity Closure of IBRA Flow of IBRA's Remaining Assets Type of Asset Divestment Program Remaining Assets Management Plan Real/Fixed Asset Property Asset Sales Program Holdco Property Property Assets Property Compaies Equity Financial Asset: Loan, Equity & Quasi equity Loan Assets Sales Program, Investment Assets Sales Program & Strategic Assets Sales Program Holdco- Non Property- Loan Assets Loan Equity , Quasi Equity Bank Shares Bank Divestment Holdco-Non Property- equity Remaining Bank Share

The Indonesian Bank Restructuring Agency For further information please visit our website : http://www.bppn.go.id I B R A The Indonesian Bank Restructuring Agency