Govt to complete bonds swap policy in March<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The government expects to finalize in March a policy that will
\nallow fixed-rate bonds in four banks to be replaced with bonds
\ncarrying a variable interest rate, according to director general
\nof financial institutions Darmin Nasution.<\/p>\n
Darmin said on Monday that some Rp 58.6 trillion (US$5.7
\nbillion) worth of fixed-rate bonds will be replaced by variable-
\nrate bonds.<\/p>\n
He said that the government will officially seek the approval
\nof the House of Representatives in two weeks.<\/p>\n
\"If they (the House) agree, then it (the conversion) in the
\nfour banks should be finalized by March,\" Darmin told reporters
\non Monday, after a hearing with House Commission IX on financial
\naffairs.<\/p>\n
The four banks are Bank Niaga, Bank Rakyat Indonesia (BRI),
\nBank Bali and Bank Tabungan Negara (BTN).<\/p>\n
The government recapitalized these banks in the wake of the
\n1998 financial crisis by injecting fixed-rate bonds. The bonds
\ncarry a fixed rate of 12 percent.<\/p>\n
In comparison, the interest rate on Bank Indonesia SBI
\npromissory notes have been hovering at around 17 percent for many
\nmonths.<\/p>\n
The government recapitalized other group of banks mostly with
\nbonds carrying variable rate attached to the SBI rate.<\/p>\n
Some bankers have urged the government to replace the fixed
\nrate bonds with variable rate bonds, as their banks have been
\nsuffering from negative spread due to the huge rate differential.<\/p>\n
Darmin said the government had set aside more than Rp 500
\nbillion to cover the additional burden resulting from the bond
\nconversion policy.<\/p>\n
The state budget covers the interest rate of the bank
\nrecapitalization bonds.<\/p>\n
The government has repeatedly said that the move is crucial to
\nhelp local banks, which have been relying heavily on interest
\npayments by the government as their income, improve their
\nfinancial performance.<\/p>\n
The country's banking sector would, therefore, have better
\nchances of luring investors.<\/p>\n
The rate conversion plans have come at a time when the
\nIndonesian Bank Restructuring Agency (IBRA) is sending out
\nbidding invitations to potential investors in Bank Niaga's sale
\nprocess.<\/p>\n
IBRA has launched the sale of a 51 percent stake in Bank Niaga
\nthrough a private placement process it hopes to finalize by June.<\/p>\n
Bank Niaga earns a flat 12 percent interest rate from some Rp
\n9.5 trillion worth of government bonds, against more than 16
\npercent it would earn if they were traded for variable rate
\nbonds.<\/p>\n
If the government is to finalize the swap by March, the timing
\ncould not be better, as it is the same time the agency is hoping
\nto receive a response from potential bidders.<\/p>\n
Aside from Bank Central Asia (BCA), the success of Bank Niaga
\nin bringing in credible investors would be important to revive
\nconfidence in the banking sector, which has been widely blamed
\nfor the slow economic recovery.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-to-complete-bonds-swap-policy-in-march-1447893297",
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"sponsor": "Okusi Associates",
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