Bank recapitalization program to go ahead<\/p>\n
JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin stressed
\non Monday that the government would not delay its bank
\nrecapitalization program despite bankers' protests.<\/p>\n
He said that bank owners should make a "great effort" to come
\nup with fresh money to finance at least 20 percent of the
\nrecapitalization program.<\/p>\n
"We have to make a great effort to implement the bank
\nrecapitalization program as scheduled," he told reporters
\nfollowing a meeting with several economic ministers.<\/p>\n
The government has required all of the country's commercial
\nbanks to have a minimum capital adequacy ratio (CAR) of 4 percent
\nby the end of this year, 8 percent by the end of 1999, and 10
\npercent by the end of 2000.<\/p>\n
CAR is the ratio between equity capital and risk-weighted
\nassets.<\/p>\n
Under the recapitalization program, the government will
\nprovide 80 percent of the required funding.<\/p>\n
Banks which are qualified to join the recapitalization program
\nare those which have a CAR of between minus 25 percent and plus 4
\npercent.<\/p>\n
Banks outside the above category have to inject fresh capital
\nor improve their nonperforming assets to raise the CAR level to
\nthe meet qualifying standard.<\/p>\n
The central bank has recently completed financial audits of
\nmost of the country's more than 200 commercial banks.<\/p>\n
Sjahril has said that most of the banks have an acute capital
\ndeficiency condition but were qualified to join the
\nrecapitalization program.<\/p>\n
Bankers last week expressed objections to the recapitalization
\nprogram, citing difficulties in raising enough cash amid the
\ncurrent tight liquidity conditions.<\/p>\n
The chairman of the Association of Indonesian Private
\nCommercial Banks, Gunarni Soeworo, said that it would be arduous
\nfor bankers even to only come up with 20 percent of the financing
\nrequirement.<\/p>\n
She added that inviting foreign investors to enter the banking
\nsector would be hard because of uncertainty in the country's
\npolitical situation.<\/p>\n
Bank Indonesia officials had urged cash-strapped bankers to
\ninvite foreign investors to help finance the recapitalization
\nprogram.<\/p>\n
The government has revised the country's banking law, which
\nallows 100 percent of foreign ownership in the banking industry.<\/p>\n
Bankers also proposed that fixed assets be used for financing
\nthe recapitalization program. This was rejected by the central
\nbank.<\/p>\n
"We want cash. Without it what's the use of recapitalization,"
\nSjahril said last week. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bank-recapitalization-program-to-go-ahead-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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