BI examines condition of 75 banks<\/p>\n
JAKARTA (JP): Bank Indonesia is currently examining the
\nfinancial condition of some 75 commercial banks to decide on
\ntheir fate, according to a senior official at the central bank.<\/p>\n
Bank Indonesia banking supervisory official Ali Said Kasim
\nsaid on Tuesday that if the banks' capital adequacy ratio (CAR)
\nwas below the minimum 4 percent requirement and if their non-
\nperforming loans (NPL) level was more than 35 percent, the banks
\nwould be put under special surveillance by the central bank and
\nwould later be transferred to the Indonesian Bank Restructuring
\nAgency (IBRA).<\/p>\n
Ali explained that it would be up to IBRA, an agency under the
\nfinance ministry, to decide whether to close down the banks,
\nmerge them with healthier banks or recapitalize them.<\/p>\n
\"We have assigned public accountants to check the 75 banks. If
\ntheir CAR is below 4 percent and the NPL level is more than 35
\npercent, they will be surrendered to IBRA,\" he said on the
\nsidelines of a meeting with the House of Representatives
\nCommission IX on banking and the state budget.<\/p>\n
He added that the 75 banks were the category-A banks which did
\nnot join the government-sponsored bank recapitalization program
\nlaunched last year as their CAR levels were over 4 percent.<\/p>\n
Many banking analysts have cautioned that the condition of
\ncategory-A banks have continued to deteriorate due to slow
\nprogress in the debt restructuring program and the still
\nunfavorable banking environment.<\/p>\n
The government, via IBRA, could either close down the banks or
\ntake them over and recapitalize them.<\/p>\n
The government will have to provide cash to pay depositors'
\nfunds if it opts to close down the banks as the government's
\nblanket guarantee policy is still in place.<\/p>\n
If the government decides to recapitalize the banks, the
\ngovernment will have to issue more bonds and thus further burden
\nthe already strained state budget.<\/p>\n
The government has already issued more than Rp 406 trillion
\n(US$47 billion) worth of bonds to finance the recapitalization
\nprogram for four state-owned banks and more than 20 private
\nbanks.<\/p>\n
The total has not included more than Rp 200 trillion worth of
\nbonds to repay the creditors and depositors of closed banks under
\nthe blanket guarantee scheme.<\/p>\n
The state budget covers the interest payable on the bonds.<\/p>\n
The government has just completed the country's costly bank
\nrecapitalization program.<\/p>\n
If the government decides to recapitalize the category-A
\nbanks, this would mean a second wave of recapitalization which
\nwould further heighten concerns over the level of public debt.<\/p>\n
The government has closed down around 66 banks since the
\noutset of the financial crisis in the middle of 1997.<\/p>\n
There are currently around 161 banks operating in the country,
\nincluding some 91 private banks.<\/p>\n
IBRA chairman Cacuk Sudarijanto said last week that the agency
\nwas planning to consolidate the number of banks by 2005 as part
\nof the effort to create a new banking landscape in the country.<\/p>\n
He said that this new banking landscape would consist of
\naround 15 \"core banks\" and 20 \"focus banks.\"<\/p>\n
Elsewhere, Ali also said that Bank Indonesia had stationed its
\nofficials in seven banks including Bank Central Asia (BCA), Bank
\nDanamon, and the state-owned Bank Mandiri, Bank Negara Indonesia
\nand Bank Rakyat Indonesia to ensure that the banks followed
\nprudential banking rulings.<\/p>\n
He didn't name the other two banks.<\/p>\n
He explained that the central bank had assigned its officials
\nto the seven banks because they had received huge sums from the
\ngovernment recapitalization fund.<\/p>\n
He pointed out, as an example, that for Bank Mandiri alone the
\ngovernment had had to issue some Rp 170 trillion worth of bonds
\nto recapitalize the bank.<\/p>\n
\"We have permanently stationed our supervisory officials in
\nthe seven banks because their recapitalization costs were huge,\"
\nAli said.<\/p>\n
\"We want to be closer to the banks so that what they are doing
\ndoesn't violate banking rulings,\" he added. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bi-examines-condition-of-75-banks-1447893297",
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