Banker supports plan on bond swap<\/p>\n
JAKARTA (JP): The government's plan to allow banks to swap
\npart of their fixed-rate recapitalization bonds with new bonds
\ncarrying a higher coupon rate is an effective way of helping
\nrecapitalized banks that are still facing liquidity shortages,
\naccording to a banker.<\/p>\n
Treasurer and international director of Bank Central Asia
\n(BCA) Fero Poerbonegoro said on Tuesday that bonds with a higher
\ncoupon rate would be more attractive to investors, making it
\neasier for banks to raise cash to improve their liquidity
\ncondition.<\/p>\n
\"With a shorter maturity and higher interest rate, the bonds
\nwill sell well in the market,\" Fero said.<\/p>\n
He said that many banks would subscribe to the new bond swap
\nplan.<\/p>\n
Fero said that BCA, the nation's largest private bank to be
\nnationalized by the government, did not, however, suffer any
\nliquidity problems.<\/p>\n
The balance sheets of most recapitalized banks are still
\ndominated by government bonds. This is not a healthy condition
\nbecause this means that the main source of the banks' revenues is
\ninterest from the bonds, rather than normal lending activity.<\/p>\n
What makes things even worse is that banks have so far found
\nit extremely difficult to sell the government bonds to the market
\nto get cash for their lending activities due to the undeveloped
\nsecondary market.<\/p>\n
Instead of injecting cash, the government issued bonds to help
\nfinance the recapitalization program of the country's ailing
\nbanks.<\/p>\n
The government has so far issued more than Rp 400 trillion
\nworth of bank recapitalization bonds consisting of about Rp 150
\ntrillion worth of fixed-rate bonds with maturity between five and
\n10 years and carrying a coupon rate of 12 percent and 14 percent,
\nand Rp 250 trillion worth of variable rate bonds with maturity of
\nup to 15 years. The rate is linked to the interest rate of Bank
\nIndonesia's one-month SBI promissory notes. The rest are indexed
\nrate bonds.<\/p>\n
Until the end of August, only around Rp 9.3 billion worth of
\nbank recapitalization bonds had been bought by investors in the
\nsecondary market.<\/p>\n
Bankers have said that the market is demanding a huge discount
\nfor the bonds.<\/p>\n
Director general of financial institutions of the finance
\nministry Darmin Nasution said on Monday that the government would
\nsoon allow banks to swap up to half of their fixed-rate bonds
\nwith new government bonds carrying a higher coupon rate.<\/p>\n
He said that the government was still making the necessary
\ncalculations but the rate of the new bonds would be even higher
\nthan the rate of the one-month SBI notes currently hovering at
\naround 13.7 percent.<\/p>\n
He said that the new plan would be realized some time near the
\nend of next month.<\/p>\n
He was also confident that the recapitalized banks would
\nwelcome the new policy.<\/p>\n
But Darmin said that the new facility would only be eligible
\nto recapitalized banks suffering a liquidity shortage.<\/p>\n
Darmin also said that the higher interest rate would not
\nincrease the state budget because banks joining the new bond swap
\nmeasure would also have to agree to lower the coupon rate of the
\nremaining half of the bonds which were not being converted.<\/p>\n
The state budget covers the interest rate of the government
\nbank restructuring bonds. The interest rate cost of the
\ngovernment bonds in the 2001 state budget is estimated at more
\nthan Rp 55 trillion. Combined with the cost of servicing
\ngovernment foreign debt, the interest rate cost would amount to
\nmore than Rp 77 trillion or around 41 percent of government's
\nroutine expenditures.(rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/banker-supports-plan-on-bond-swap-1447893297",
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