Govt will avoid closing more banks: BI director<\/p>\n
JAKARTA (JP): Financial authorities will try to avoid closing
\nmore banks because existing banks can no longer cover the
\ncountry's economic activities, a central bank executive said here
\non Tuesday.<\/p>\n
Bank Indonesia director Subarjo Joyosumarto said the recent
\nclosure of 38 banks resulted in an 18 percent drop in the
\navailability of banking services.<\/p>\n
He said the drop in banking services was larger than the 13
\npercent decline in the country's gross domestic product last
\nyear, meaning some 5 percent of the country's economic activities
\nwere left without banking services.<\/p>\n
"That's why we will try to avoid closing more banks," Subarjo
\nsaid on the sidelines of a banking seminar.<\/p>\n
He added the government would encourage stronger banks to
\nacquire branches of the closed banks to bridge the gap in the
\navailability of banking services.<\/p>\n
The government closed 38 local banks on March 13 as part of
\nits massive restructuring of the banking industry. The government
\nalso took over seven banks and included nine banks in its
\nrecapitalization program.<\/p>\n
Seventy-three other local banks have a sufficient level of
\ncapital to continue operating without joining the
\nrecapitalization program.<\/p>\n
Some analysts fear the government will close more banks if the
\nowners of the nine banks in the recapitalization program are
\nunable to raise their 20 percent of the funding required for
\nrecapitalization by the April 21 deadline, or if the owners of
\nthe other existing banks fail to pass the government's fit and
\nproper test.<\/p>\n
Subarjo said the government would not close the nine private
\nbanks in the recapitalization program because they were
\nconsidered among the country's healthy banks.<\/p>\n
"The worst-case scenario would be the government was forced to
\ntake over more banks."<\/p>\n
The nine banks in the recapitalization program include
\npublicly listed Bank Lippo, Bank Niaga, Bank Internasional
\nIndonesia, Bank Universal and Bank Bali.<\/p>\n
Subarjo added the government also would try to avoid closing
\nany of the 73 banks not in the recapitalization program. These
\nbanks still are required to pass a fit and proper test to ensure
\nthey will be able to maintain their level of capital.<\/p>\n
Central bank governor Sjahril Sabirin said the owners of the
\nnine private banks in the recapitalization program had guaranteed
\ntheir ability to provide their 20 percent of recapitalization
\nfunding.<\/p>\n
However, he said that for joint venture banks, foreign
\nshareholders had to come up with fresh funds for recapitalization
\nby April 21 or risk having their banks closed.<\/p>\n
Joint venture banks are not allowed to join the government's
\nbank recapitalization program in which the government provides up
\nto 80 percent of the required recapitalization funds.<\/p>\n
Sources earlier said a number of joint venture banks could
\nface closure because their foreign shareholders were reluctant to
\ninject fresh funds into the banks.<\/p>\n
Subarjo said the recapitalization program had resulted in the
\ngradual improvement of macroeconomic indicators, including the
\nstrengthening of the rupiah against the US dollar.<\/p>\n
He said improvements in the macroeconomic condition would
\ncreate a conducive environment for a much awaited cut in domestic
\ninterest rates.<\/p>\n
"I think the time is ripe for interest rates to decline."<\/p>\n
He added, however, that a cut in interest rates should be
\n"done carefully" because it would affect the rupiah's exchange
\nrate and inflation.<\/p>\n
He also said the central bank would lower the interest rates
\nof government-guaranteed bank time deposits.<\/p>\n
The interest rate on the central bank's benchmark one-month
\nSBI promissory note is now 37.60 percent, down from over 40
\npercent two weeks ago. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-will-avoid-closing-more-banks-bi-director-1447893297",
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