Govt to inject Rp 4t into merged Bank Bali<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The government will inject some Rp 4 trillion (US$450 million)
\ninto Bank Bali after the bank is merged with four weaker banks,
\naccording to the Indonesian Bank Restructuring Agency (IBRA).<\/p>\n
IBRA said in a statement on Wednesday that the publicly-listed
\nBank Bali would issue new shares at the end of September, while
\nthe government would act as the underwriter.<\/p>\n
The capital injection is needed to keep Bank Bali's capital
\nadequacy ratio (CAR) above the 8 percent minimum level set by the
\ncentral bank.<\/p>\n
CAR is the ratio between capital and risk-weighted assets.
\nThe higher the CAR, the healthier the bank is.<\/p>\n
The government is planning to merge Bank Bali with four other
\nbanks, including Bank Universal, Bank Prima Express, Bank
\nArthamedia and Bank Patriot. The newly-merged bank will use the
\nBank Bali name.<\/p>\n
Of the five banks, only Bank Bali has a relatively strong CAR
\nlevel, while the others are poorly capitalized. As of March, Bank
\nPatriot's CAR stood at 1 percent, while Bank Universal's and Bank
\nPrima Express' CAR stood at minus 16.6 percent and minus 49.4
\npercent respectively.<\/p>\n
Merging the weaker banks with Bank Bali will cause the
\nlatter's CAR level to plunge to below the minimum 8 percent
\nlevel. That is why the government needs to recapitalize Bank Bali
\nafter the merger.<\/p>\n
The five banks to be merged are among 11 private banks under
\nthe control of IBRA, which is in charge of leading the banks back
\ninto good financial shape before returning them to the private
\nsector.<\/p>\n
Merging local banks is seen as part of the effort to
\nrestructure the country's troubled banking industry.<\/p>\n
A healthy banking sector is crucial to accelerating the
\ncountry's economic recovery process.<\/p>\n
IBRA was set up in 1998 to manage assets and loans it took
\nover from the collapsed banking system after a $60 billion
\nfinancial sector bailout following the 1997-1998 Asian financial
\ncrisis.<\/p>",
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"sponsor": "Okusi Associates",
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