Govt defends delay of bank closures<\/p>\n
JAKARTA (JP): The government insisted on Sunday that the delay
\nof the scheduled bank closures was entirely due to technical
\nconsiderations and had no political motives, denying that
\nlobbyings by bank owners had anything to do with it.<\/p>\n
Finance Minister Bambang Subianto and Bank Indonesia's
\n(central bank) Governor Sjahril Sabirin told a news conference
\nthat the delay of the bank closures by two weeks from the
\noriginally planned date of Feb. 27 was designed to ensure a fair,
\ntransparent and accountable decision.<\/p>\n
\"We decided to give several banks in Category B until
\nWednesday to revise their business plans and all other banks
\nuntil March 9 to inject fresh equity funds to meet the minimum
\ncapital adequacy ratio of more than 4 percent,\" Sjahril
\nexplained.<\/p>\n
Bambang said the delay would also give the evaluation teams
\nmore time to check the banks records and the integrity of owners
\nand management, to ensure that all banks escaping the massive
\ncleanup would really be able to sustain viable operations.<\/p>\n
\"We are preparing a package of measures with such complete
\ndetails that by the time we announce them there will no longer be
\nany questions about the fairness, transparency and credibility of
\nour decision,\" Bambang said.<\/p>\n
\"We know how crucial will be the decision we are preparing to
\nrestore public trust in our baking industry. We therefore are
\ndoing our best to avoid even the slightest doubt and smallest
\nmistake,\" he said.<\/p>\n
Bambang said he realized that another botched handling of the
\nbanking crisis would entirely wipe out whatever public trust
\nstill remained in both the government and monetary authorities.<\/p>\n
However, analysts and several officials still could not accept
\nthat technical grounds were the primary reason behind the delay
\nof the long-awaited announcement.<\/p>\n
Farid Harianto, deputy chairman of the Indonesian Bank
\nRestructuring Agency (IBRA) insisted on Saturday that President
\nB.J. Habibie's last week decision on delay was prompted also
\nby political considerations.<\/p>\n
He said the delay was a setback to the government bank
\nrestructuring program both in terms of credibility and cost
\nbecause a one-month postponement in the liquidation process would
\ncost the banking industry some Rp 7.5 trillion (about US$882.35
\nmillion) in losses incurred by negative interest spreads.<\/p>\n
\"Political motives are behind the delay. What do the political
\ndecision-makers really want? From the technical side, we don't
\nhave any problem,\" he told a seminar held by the Indonesian
\nEconomists Association.<\/p>\n
Former oil and energy minister Subroto shared the same view,
\nsaying that the strongly criticized delay was made to preserve
\nthe status quo of the current administration ahead of a general
\nelection in June.<\/p>\n
He pointed out that the government would not dare to close
\nmany banks as this would create large unemployment ahead of the
\ngeneral election.<\/p>\n
\"The political decision-makers want to preserve the status quo
\nthrough economic means. It's as simple as that,\" he told the
\nseminar.<\/p>\n
Coordinating Minister for Economy, Finance, and Industry
\nGinandjar Kartasasmita announced on Friday that the closing down
\nof a number of banks, scheduled for Saturday (Feb. 27), was
\npostponed for at least two weeks to allow more time for
\nevaluation teams and bankers to produce a fairer, more
\ntransparent and accountable decision on the bank restructuring
\nprocess.<\/p>\n
Finance Minister Bambang Subianto was initially surprised and
\ndeclined to comment on Ginandjar's morning statement, but said a
\nfew hours later that the delay was made in order to give the
\nsteering committee, which comprises senior economic ministers,
\nenough time to evaluate the banks' business plans.<\/p>\n
Banks are required to submit a business plan in order to be
\nable to join the government bank recapitalization. The business
\nplan contains measures including on how to lift the capital
\nadequacy ratio (CAR) to a minimum level of 8 percent by 2001,
\nsettle problem loans, and solve the legal lending limit.<\/p>\n
Farid, however, disclosed that evaluation of the business plan
\nshould not be considered as a complex process.<\/p>\n
\"We're just evaluating whether the plan makes sense. That's
\nall,\" he said.<\/p>\n
Economists and bankers lambasted the decision to delay the
\nbank closures, citing that the move would tarnish an already
\nshaky confidence in the bank restructuring program and the
\noverall economic reform programs.<\/p>\n
The Indonesian Private Banks Association's chairman, Gunarni
\nSoeworo, said in statement that the association regretted the
\ngovernment's inconsistency in its bank restructuring measures.<\/p>\n
She said that this could further lower public confidence and
\ncause a massive run on banks, which, in turn, would prove
\nexpensive for the government.<\/p>\n
Economist Anwar Nasution also criticized the inconsistency,
\nsaying that it was a major setback in the efforts to boost the
\npublic's confidence, which was an essential factor in the
\ncountry's economic recovery.<\/p>\n
Economist Faisal Basri concurred. \"I've just received a fax
\nfrom New York that (the policy) has caused the government's
\ncredibility to tumble in the eyes of foreign investors.\"<\/p>\n
Former finance minister Fuad Bawazier doubted the government's
\nargument that technical preparation was the reason for the delay.<\/p>\n
\"In past liquidation measures, the preparation didn't take a
\nlong time,\" he said.<\/p>\n
\"The delay only adds credence to rumors that there have been
\nexternal pressures in the process (to prevent certain banks from
\nbeing liquidated),\" he said.<\/p>\n
The long-awaited announcement on the bank cleanup, promised by
\nHabibie to be made on Feb. 27, was set to disclose which
\ninsolvent banks would go down, which ones would be qualified for
\nthe government-sponsored bank recapitalization program and which
\nbanks were considered sound.<\/p>\n
Under the government bank recapitalization program, designed
\nto lift the banks' CAR to the minimum level of 4 percent, the
\ngovernment would provide up to 80 percent of the recapitalization
\nfunding.<\/p>\n
CAR is the ratio between capital and risk-weighted assets.<\/p>\n
The delay seems to validate rumors that bankers have been busy
\nlobbying senior ministers to save their banks from being
\nliquidated.<\/p>\n
The fact that the final decision of the bank recapitalization
\nprogram would be decided by the President's economic and finance
\nresilience council failed to stave off the rumors.<\/p>\n
Businessman Aburizal Bakrie, who also owns several banks which
\nneed to be recapitalized, denied on Saturday that he was involved
\nin the decision-making process for the bank restructuring
\nmeasures.<\/p>\n
Aburizal is a member of the economic and finance resilience
\ncouncil. (rei\/rid)<\/p>",
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