Governnment statement on bank closure<\/p>\n
JAKARTA (JP): The following is the full text of the
\ngovernment's statement on the closure of 16 commercial banks,
\nwhich was announced Saturday.<\/p>\n
Banks, as financial intermediaries that collect and distribute
\nthe funds of society, play a strategic role in the Indonesian
\neconomy. For this reason, banks must continuously safeguard their
\nfinancial health in order to maintain public trust. This
\ncondition can only be achieved if, in their business activities,
\nbanks continuously implement principles of prudent and sound
\nbanking practices and are responsive to the guidance of the
\ncentral bank as the bank supervisory authority.<\/p>\n
Based on the results of the investigation conducted by Bank
\nIndonesia, the financial condition and business development of
\nseveral banks has been found to be unhealthy. These banks are
\ninsolvent to the point of endangering business continuity,
\ndisturbing the overall banking system, and harming the interests
\nof society. On the basis of existing regulations and laws, Bank
\nIndonesia has continuously endeavored to rescue banks that face
\ndifficulties. These efforts have included, among other steps:
\nchanging the bank's board of commissioners or directors;
\nrequesting shareholders to increase their capital; improving the
\nquality of earning assets; seeking new investors; and encouraging
\nbusiness consolidation or acquisition by sound banks.<\/p>\n
As a result of these efforts, a number of problem banks have
\nbeen successfully rescued and at this moment are carrying on
\ntheir business in a sound and orderly fashion. Nonetheless, there
\nexist several banks that are still facing serious structural
\ndifficulties and the effort to rescue these banks has not
\nproduced the expected result.<\/p>\n
In consideration of this situation and the framework of
\nstrengthening the national banking system, as decided in the
\nlimited cabinet meeting of economy, finance, development
\nsupervision, production and distribution on the 3rd of September
\n1997, the government is taking steps to liquidate banks that can
\nno longer be rescued, in accordance with existing regulations,
\nwhile safeguarding small depositors to the fullest extent
\npossible. For this reason, the Government has decided to withdraw
\nthe licenses of 16 commercial banks (see table)<\/p>\n
In taking these steps, the government has considered various
\nfactors and has weighed different interests, particularly those
\nof depositors. Moreover, the government is fully aware of the
\nimpact of this decision. Therefore, parties that have direct or
\nindirect interests in the banks that are to be liquidated are
\nrequested to note the following :
\n 1. Customers with savings at these banks, whether in the form of
\nsaving deposits, checking deposits, or time deposits, will be
\nable to recover their savings up to the amount of Rp 20 million
\n(about US$5,800) per account, using bridge financing from the
\ngovernment. By covering deposits up to this amount, the savings
\nof around 93.7 percent of the total number of depositors at the
\nliquidated banks will be protected.
\n 2. With respect to the employees of the liquidated banks, the
\ngovernment will implement Article 23 of the government regulation
\nNo.68\/1996 concerning the rule and procedure for withdrawing
\nbusiness licenses, bank closure and liquidation.
\n 3. All creditors of the liquidated banks, such as other banks,
\nholders of commercial papers issued by the liquidated banks, and
\nother creditors, will be paid from the proceeds of the sale of
\nthe banks' assets if funds are available after liquidation.
\n 4. All debtors are required to fulfill their obligations, with
\nimplementation carried out by the liquidation team. If they do
\nnot fulfill their obligations, legal sanctions will be imposed in
\naccordance with existing regulations.
\n 5. Owners and shareholders of the liquidated banks are
\nresponsible for all consequences that arise and are obliged to
\ncooperate with the liquidation team.
\n 6. All parties involved in the management of the banks, namely
\nshareholders, the Board of Commissioners, the Board of Directors,
\nand other bank employees, are instructed to exercise extra
\ncaution in bank management and base their activities on the
\nprinciples of sound and prudential banking. We also hope that
\nbanks will draw a lesson from this action of the government so
\nthat preventive measures can be taken as early as possible.<\/p>\n
It should be emphasized that all banks that are not liquidated
\nwill carry out their operations as usual.
\n 7. To the public at large, we would like to emphasize that this
\naction of the government is taken in order to revitalize the
\nnational banking system. Therefore, we appeal to all members of
\nsociety to remain calm. All consequences that arise as a result
\nof the closure of these banks will be handled by the Joint Team
\nfrom related institutions, namely, Bank Indonesia, the Ministry
\nof Finance, the Attorney General's Office, the Police, and the
\nMinistry of Manpower. Further steps required as a consequence of
\nthe closure of these banks will be carried out by each bank's
\nliquidation team.<\/p>",
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