BI Governor defends bank program<\/p>\n
JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin said on
\nFriday that the decision to include the privately-run Lippo Bank
\namong the first 12 banks to receive government recapitalization
\nfunds had nothing to do with nepotism but was based on the bank's
\nability to meet the necessary requirements.<\/p>\n
Sjahril argued that Lippo was awarded the lion's share of the
\nfirst tranche of recapitalization funds because it was the
\nlargest among the first group of banks selected for
\nrecapitalization.<\/p>\n
"It's not because Lippo's owner is close to President B.J.
\nHabibie. Lippo is ready and has put up the required 20 percent
\nshare of the recapitalization funds," he told reporters following
\na meeting with President Habibie.<\/p>\n
Sjahril, who was accompanied by Minister of Finance Bambang
\nSubianto, said that other private banks in the country were not
\nyet ready to join the recapitalization program.<\/p>\n
The publicly-listed Lippo Bank, controlled by the well-
\nconnected Riady family, is one of the country's largest private
\nbanks.<\/p>\n
A government decree dated Jan. 18 stipulated that Lippo Bank
\nwould get Rp 3.75 trillion out of Rp 4.29 trillion that has been
\nallocated to fund bank recapitalization during the first phase of
\nthe program.<\/p>\n
The remaining funds will be shared between 10 regional
\ndevelopment banks, which are owned by provincial administrations,
\nand one small private bank, Bank Sembada Artanugroho (Bank
\nSanho).<\/p>\n
However, Bambang said the size of funds which would be made
\navailable to Lippo had not yet been finalized.<\/p>\n
"That is not the final amount...it's just a ceiling. The final
\nfigure will be accounted for in the company's (bank's) statutes,"
\nhe said.<\/p>\n
The government has made it mandatory for all commercial banks
\nto have a minimum capital adequacy ratio (CAR) of 4 percent by
\nthe end of March.<\/p>\n
Banks with capital adequacy ratios of between minus 25 percent
\nand less than 4 percent are eligible to join the government-
\nsponsored bank recapitalization program. The government will
\nprovide 80 percent of the funds necessary to recapitalize banks
\nqualifying for the program.<\/p>\n
Over 200 of the country's commercial banks were audited during
\na preliminary phase of the program. Those found to be meeting the
\nminimum capital adequacy ratio must now submit a business plan to
\nthe Minister of Finance and the central bank governor, who
\ntogether will decide which banks qualify for the program.<\/p>\n
The cost of recapitalizing the country's commercial banks has
\nbeen placed at about one third of gross domestic product, or
\nbetween US$35 billion and $40 billion. Twenty percent of this sum
\nmust be provided by bank owners and private investors.<\/p>\n
The government plans to finance its 80 percent share of the
\nprogram by issuing long-term bonds.<\/p>\n
Interest payable on the bonds is expected to amount to Rp 34
\ntrillion per year, of which Rp 16 trillion will come from the
\nsale of banks' assets. The government has said the remaining Rp
\n18 trillion will come out of the 1999\/2000 state budget, although
\nthe House of Representatives has yet to give its approval to this
\nproposal.<\/p>\n
The country's seven state banks are expected to receive around
\nhalf of the funds available under the program.<\/p>\n
The government will take non-voting shares in exchange for its
\n80 percent equity investment in the recapitalized banks. The
\nbanks themselves will be given the first option to repurchase the
\ngovernment's shares for the first three years after
\nrecapitalization, and only after that will the shares be made
\navailable to outside investors.<\/p>\n
Bank recapitalization is seen as a vital step toward setting
\nthe economy on the road to recovery, but many observers have
\nexpressed reservations over the program as it currently stands.<\/p>\n
The 10 regional banks which will receive funds during the
\nfirst phase of the program are located in Aceh (Rp 80.94
\nbillion), North Sumatra (Rp 259.93 billion), Bengkulu (Rp 6.30
\nbillion), Lampung (Rp 18.58 billion), West Kalimantan (Rp 65.92
\nbillion), East Kalimantan (Rp 15.97 billion), North Sulawesi (Rp
\n31.85 billion), Central Sulawesi (Rp 2.79 billion), West Nusa
\nTenggara (Rp 21.52 billion) and East Nusa Tenggara (Rp 10.82
\nbillion). (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bi-governor-defends-bank-program-1447893297",
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