Fitch IBCA may cut RI's debt ratings<\/p>\n
NEW YORK (Reuters): International rating agency Fitch IBCA
\nsaid Wednesday it may cut Indonesia's BBB-minus long-term foreign
\ncurrency rating and F3 short-term rating because of political and
\npolicy uncertainty.<\/p>\n
At the same time, Fitch IBCA said that the possibility of the
\ngovernment imposing foreign exchange controls meant that there is
\npotential transfer risk of economic origin, which might prevent
\nsupport for foreign currency creditors.<\/p>\n
Fitch IBCA's legal rating -- the rating designed to indicate
\nwhether support would be likely for distressed institutions -- of
\nthe 13 Indonesian commercial banks rated by Fitch IBCA will
\nhenceforth have \"T\" added. The \"T\" indicates transfer risk, and
\nis normally added to banks domiciled in non-investment grade
\ncountries to show the potential lack of the sovereign's ability
\nto provide foreign currency support.<\/p>\n
The legal rating of Bank Dagang Nasional Indonesia (BDNI) has
\nalso changed from 4 to 4T (see table) and the agency has placed
\nthe individual rating of C, short-term rating of B and long-term
\nrating of BB-plus on RatingWatch with negative implications.<\/p>\n
Because of the difficulties in Indonesia, we expect BDNI's
\nasset quality to decline and non-performing loan ratios to at
\nleast double in 1998.<\/p>\n
BDNI's risk weighted capital ratio will also decline on
\naccount of balance sheet inflation resulting from the upward
\nrevaluation of U.S. dollar loans.<\/p>\n
The current environment makes it very difficult to raise
\ncapital but we believe that the Gajah Tunggal Group which
\ncontrols the bank has sufficient resources, should the bank
\nrequire additional capital.<\/p>\n
Concern about President Soeharto's health, albeit
\nunsubstantiated, has renewed fears about the manner and timing of
\na regime change, should the president die or his capabilities be
\nimpaired.<\/p>\n
The agency comments that while these fears are not new, such
\nan event would undoubtedly divert policy-makers attention away
\nfrom the country's current troubles.<\/p>\n
Likewise, the initial optimism which accompanied the
\nannouncement of the IMF rescue package in October has been
\ndispelled by concerns about backsliding and an ill-defined policy
\nagenda.<\/p>\n
Fitch IBCA acknowledges that structural adjustments take
\nlonger to implement, but says international investors need more
\ntransparent indicators against which to measure Indonesia's
\nprogram performance.<\/p>\n
Growing concern about these factors has undermined investor
\nconfidence, causing the currency to fall to new lows and adding
\nto pressures on the corporate and financial sectors.<\/p>\n
Fitch IBCA says although Indonesia wasted little time in
\napproaching IMF when the Asia crisis broke, compared to some
\nother countries in the region it has little room for maneuver,
\ngiven its high level of external debt.<\/p>\n
As the fourth largest debtor in the developing world,
\nIndonesia has the highest net external debt ratio of any country
\nin the BBB category.<\/p>\n
Moreover, the fact that a significant component of this debt
\nis short-term, intensifies its susceptibility to shocks. The
\nagency assigned Indonesia a long-term foreign currency rating of
\nBBB-minus and a short-term rating of F3 in June 1997.<\/p>\n
Table: Fitch IBCA's legal rating<\/p>\n
Banks New Previous<\/p>\n
-----------------------------------------------------<\/p>\n
Bank Central Asia 4T 4<\/p>\n
Danamon 4T 4<\/p>\n
Bank Internasional Indonesia 4T 4<\/p>\n
Lippo Bank 4T 4<\/p>\n
Bank Niaga 4T 4<\/p>\n
Bank Umum Nasional 4T 4<\/p>\n
Panin Bank 4T 4<\/p>\n
Bank Duta 4T 4<\/p>\n
Bank Negara Indonesia 2T 2<\/p>\n
Bank Ekspor-Impor 2T 2<\/p>\n
Bank Rakyat Indonesia 2T 2<\/p>\n
Bank Dagang Negara 2T 2<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/fitch-ibca-may-cut-ris-debt-ratings-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }