BI closes Unibank as CAR drops below zero<\/p>\n
Berni K. Moestafa
\nApriadi Gunawan
\nThe Jakarta Post
\nJakarta\/Medan<\/p>\n
Bank Indonesia closed on Monday the publicly listed PT
\nUnibank, after days of massive runs against the bank had plunged
\nits capital adequacy ratio (CAR) into negative territory.<\/p>\n
Bank Indonesia Senior Deputy Governor, Anwar Nasution, said
\nthe Indonesian Bank Restructuring Agency (IBRA) would take over
\nUnibank to handle its closure.<\/p>\n
\"As of October 29, 2001, Bank Indonesia has placed the bank
\nunder suspension and has surrendered PT Unibank to IBRA,\" Anwar
\nsaid in a press meeting.<\/p>\n
He said Unibank's closure would also require the government to
\ncall in its blanket guarantee scheme to cover the bank's third
\nparty funding.<\/p>\n
IBRA would be in charge of resolving the bank's liability
\nthrough this state guarantee scheme, he said.<\/p>\n
He said Unibank owned third party liabilities of some Rp 3.1
\ntrillion (about US$302.14 million), which would roughly represent
\nthe amount the government must cover.<\/p>\n
IBRA would also attempt to recoup from the bank's owners the
\npublic money used under the blanket guarantee, and ensure that
\nUnibank's employees obtained their rights.<\/p>\n
\"The rights and authority of the bank's management,
\nshareholders, including that of its shareholders' meetings, are
\nherewith transferred to IBRA,\" Anwar explained.<\/p>\n
He called on clients of Unibank to remain calm, saying their
\naccounts were safe under the state blanket guarantee scheme.<\/p>\n
Clients may withdraw their money at Unibank's branch offices
\nstarting Monday, Nov. 5, he explained.<\/p>\n
Unibank has been suffering from a heavy run on deposits, which
\nreportedly began in Medan last week. On Monday, hundreds of
\npeople in Medan descended on the bank hoping to withdraw their
\nfunds, but it had already been shut down.<\/p>\n
Anwar said the heavy run suffered by the bank had plunged its
\nCAR level into negative territory.<\/p>\n
He did not provide details of Unibank's latest CAR position,
\nbut Bank Indonesia regulations require a minimum CAR level of
\nfour percent.<\/p>\n
According to Anwar, the small institution's financial troubles
\nmainly stemmed from its violation of the legal lending limit for
\nbanks.<\/p>\n
Unibank had channeled some 51 percent of its loans to
\naffiliated companies that were unable to repay them, he said.<\/p>\n
This compares to 20 percent of a bank's loans allowed under
\nBank Indonesia's legal lending limit rule.<\/p>\n
Bank Indonesia, he said, had been trying to nurture Unibank
\nback to health since 1998 when it was placed under special
\nsurveillance by the central bank.<\/p>\n
\"We gave the bank's management more than enough time when the
\nbank was under Bank Indonesia's special surveillance period, yet
\nits financial position kept worsening,\" he said.<\/p>\n
He said the government had intended to close Unibank earlier,
\nbut had lacked the funds for the blanket guarantee scheme.<\/p>",
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