Ax to fall on ailing banks on Feb. 27<\/p>\n
JAKARTA (JP): President B.J. Habibie said on Thursday that the
\ngovernment would close down a number of ailing banks on Feb. 27
\nas part of its program of cleaning up the country's crowded and
\nweak banking industry.<\/p>\n
The president did not name the banks but said that all private
\nbanks with a capital adequacy ratio (CAR) of less than minus 25
\npercent would be closed down.<\/p>\n
He said on Thursday that this group of banks could no longer
\nbe rescued.<\/p>\n
\"The government will liquidate the banks in category C on
\nFebruary 27,\" he told reporters after meeting with the Indonesian
\nChamber of Commerce and Industry on Thursday. \"This is not idle
\ngossip. This is for real,\" he added.<\/p>\n
The government has divided the country's some 200 commercial
\nbanks on the basis of their CAR level. Category A banks are those
\nwith a CAR equal to or above 4 percent, category B banks are
\nthose with a CAR of between less than 4 percent and minus 25
\npercent, and category C banks are those with a CAR of less than
\nminus 25 percent.<\/p>\n
CAR is the ratio between paid up capital and risk-weighted
\nassets. Banks, which are eligible to join the government bank
\nrecapitalization program are those listed in category B.<\/p>\n
However, Bank Indonesia Governor Sjahril Sabirin said
\nseparately on Thursday that the government has not set any
\nspecific date on when the bank closures would be announced.<\/p>\n
He admitted that the announcement would be made some time
\nafter the 26th of February following approval of the government
\nstate budget proposal by the House of Representatives.<\/p>\n
\"I hope the public will not panic as all deposits are
\nguaranteed by the government,\" he told reporters on the sidelines
\nof a hearing on the bank recapitalization program with the House
\nof Representatives Commission VIII on state budget and finance.<\/p>\n
The state budget covers part of the government's bank
\nrecapitalization costs.<\/p>\n
\"We hope we can move fast with the liquidation measure,\" Bank
\nIndonesia director Soebardjo Djojosoemarto told reporters on the
\nsidelines of the hearing.<\/p>\n
He said that 38 banks including seven state banks and several
\nprovincial development banks were in category C.<\/p>\n
He said that the government would recapitalize the state banks
\nand the provincial development banks regardless of their CAR
\nstatus.<\/p>\n
He added that some 66 banks were in category B, and 62 banks
\nwere in category A.<\/p>\n
He also said that banks in category B would not necessarily be
\nrecapitalized as the banks had to meet several criteria including
\nproduction of a feasible business plan which contains measures to
\nlift the CAR level to 8 percent by 2001, settling the banks'
\noutstanding loans, meeting a legal lending limit, and the
\nrepayment of Bank Indonesia liquidity support given to them.<\/p>\n
The owners and the management must also pass the 'fit and
\nproper' test.<\/p>\n
\"They must not be included in our blacklist of bad bankers,\"
\nSoebardjo pointed out.<\/p>\n
The last requirement to join the recapitalization program was
\nthat the owners had to come up with 20 percent of their funding
\nneeds in cash, as the government would provide up to 80 percent
\nof the remaining funding by issuing bonds, he said.<\/p>\n
He added that category B banks failing to meet the
\nrecapitalization requirements would also be closed down.<\/p>\n
Soebardjo stressed that the government would have the same
\nrights as the other shareholders in the recapitalized banks.<\/p>\n
\"We won't provide the recapitalization funds if we don't have
\nthe same rights,\" he said.<\/p>\n
Several government officials have earlier said that the
\ngovernment's 80 percent share ownership in the recapitalized
\nbanks would entail non-voting rights. (rei\/prb)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ax-to-fall-on-ailing-banks-on-feb-27-1447893297",
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"sponsor": "Okusi Associates",
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