40 banks may be closed down on Feb. 27, Sjahril reveals<\/p>\n
JAKARTA (JP): The government may close down some 40 private
\nbanks on Feb.27 in a bold effort to restructure the country's
\nbattered banking industry, Bank Indonesia Governor Sjahril
\nSabirin said on Tuesday.<\/p>\n
Sjahril said that although government evaluation of the
\nbusiness plans submitted by the ailing banks had yet to be
\ncompleted, the number of banks to be liquidated could be around
\nthat figure.<\/p>\n
"We don't know yet the final figure because we're still
\nfinishing the evaluation of their business plans... but maybe it
\nwill be 40 banks or a little fewer," he said in response to
\nquestions raised by journalists at a press conference after his
\nmeeting with President B.J. Habibie.<\/p>\n
Habibie announced last week that the government would close
\ndown banks with a capital adequacy ratio (CAR) of less than minus
\n25 percent on Feb.27 as these crippled institutions were beyond
\nbailout.<\/p>\n
The government has divided the country's more than 200
\ncommercial banks into three categories based on their CAR level.
\nCategory A banks are those with a CAR of equal to or more than 4
\npercent, category B banks covering those with a CAR of between
\nminus 25 percent and less than 4 percent and category C banks are
\nthose with a CAR of less than minus 25 percent.<\/p>\n
The government has said that banks in category B are eligible
\nto join the government bank recapitalization program, which is
\ndesigned to bring the CAR to the minimum level of 4 percent.<\/p>\n
CAR is the ratio between capital and risk-weighted assets.<\/p>\n
Bank Indonesia director Soebardjo Djojosoemarto said last week
\nthat 38 banks were in the category C.<\/p>\n
Sjahril, however, said that as of Monday there were several
\ncategory C banks which had injected fresh capital to lift their
\nstatus to that of category B banks.<\/p>\n
He added, however, that category B banks might also risk
\nliquidation if their business plans were rejected or if the
\nowners failed to come up with the 20 percent recapitalization
\nfunding requirement.<\/p>\n
The government has promised to provide up to 80 percent of the
\nfunding requirements.<\/p>\n
The business plans include corporate programs to raise CAR to
\na minimum level of 8 percent by 2001, settle legal lending limits
\n(excessive connected lendings) and Bank Indonesia liquidity
\nsupport.<\/p>\n
The management and owners of banks must also pass the 'fit and
\nproper' test by the central bank to prevent people of
\nquestionable reputation and integrity from entering recapitalized
\nbanks.<\/p>\n
Banks which have received approvals for their business plans
\nwould be given until April 21 to inject the 20 percent funding
\nrequirement.<\/p>\n
The deadline for submitting the business plans passed on
\nMonday.<\/p>\n
Sjahril admitted that right until the deadline several bank
\nowners were trying hard to lobby several ministers and Bank
\nIndonesia officials not to enter their banks in the category
\nliable to liquidation.<\/p>\n
He stressed, however, that the criteria for bank liquidation
\nwas already clear-cut.<\/p>\n
Sjahril again called on the public not to panic over the bank
\nliquidation move as all deposits are guaranteed by the
\ngovernment.<\/p>\n
The government is expected to publicly disclose the complete
\nbank restructuring and recapitalization measures soon after the
\nHouse of Representatives approves the 1999\/2000 state-budget
\nproposal, which allocates Rp 18 trillion for the recapitalization
\nprogram, on Feb.26.<\/p>\n
The government backed off from its earlier controversial
\ndecision to first recapitalize the privately-run Lippo Bank and
\nSanho Bank, together with 10 other provincial development banks,
\nfollowing strong criticisms from the House.<\/p>\n
The decision was considered flawed as it was taken before the
\nHouse approved the budget proposal.<\/p>\n
In a government decree dated Feb.18, Lippo was to be given Rp
\n3.75 trillion of the Rp 4.29 trillion allocated for the first
\nbatch of 12 banks to be recapitalized.<\/p>\n
Some suspected that Lippo received the lion's share of the
\nrecapitalization funding due to the owners' cozy relations with
\nHabibie. (rei\/prb)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/40-banks-may-be-closed-down-on-feb-27-sjahril-reveals-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}