IBRA assuages concerns over banks' capital rule<\/p>\n
JAKARTA (JP): Chairman of the Indonesian Bank Restructuring
\nAgency Edwin Gerungan said on Tuesday that the capital adequacy
\nratio (CAR) levels of Bank Internasional Indonesia (BII) and Bank
\nUniversal were 6.75 percent and 4.75 percent respectively.<\/p>\n
\"But these two banks still have ample time to increase their
\nCAR levels to the minimum 8 percent required by the central bank
\nat end of this year,\" Gerungan added in a statement.<\/p>\n
He said that the slow rise in Bank Universal's CAR level was
\ncaused by its aggressive lending operations which last year alone
\nchanneled around Rp 3 trillion to mostly small and medium-scale
\nenterprises.<\/p>\n
Many other IBRA-controlled banks already have CARs higher than
\n8 percent, but remain reluctant to resume significant lending,
\npreferring to invest their funds in Bank Indonesia's debt papers.<\/p>\n
CAR is the ratio between capital and risk-weighted assets.
\nLoans are classified as assets with a 100 percent risk.<\/p>\n
\"Anticipatory measures have been taken by the management of
\nthe two banks, together with IBRA, to find the best and optimum
\nalternative solution to meet the Bank Indonesia capital standard
\nrequirement,\" Edwin said.<\/p>\n
\"Merger is one alternative but the government wants it to be a
\nnatural process chosen by the banks,\" he reiterated.<\/p>\n
Elsewhere, Edwin said that the CARs of other IBRA-controlled
\nbanks were already well above the year-end minimum level of 8
\npercent.<\/p>\n
Citing examples, he said that Danamon's CAR was now 41.27
\npercent and Bank Niaga's 17.98 percent, as of September.<\/p>\n
He also said that the non-performing loan level (NPL) of Bank
\nLippo had declined from 45.28 percent to 36.13 percent in
\nSeptember, while the NPL of Bank Universal declined from 31.57
\npercent to 21.03 percent in June.<\/p>\n
Separately, IBRA's outgoing deputy chairman Jerry Ng said the
\nagency would not force banks under its management to merge in
\norder to be able to meet the 8 percent minimum CAR level later
\nthis year.<\/p>\n
Jerry said that although merger was one alternative, it ought
\nto be based on \"market forces\".<\/p>\n
\"IBRA won't force banks to merge,\" he told reporters,
\nfollowing a meeting with Coordinating Minister for the Economy
\nRizal Ramli and International Monetary Fund (IMF) Jakarta
\nrepresentative John Dodsworth on Tuesday.<\/p>\n
Jerry said that there were various options available to help
\nbanks meet the year-end minimum 8 percent CAR requirement, which
\nincluded inviting new strategic investors.<\/p>\n
\"Merger is not the only solution,\" said Jerry, who tendered
\nhis resignation last week.<\/p>\n
There has been speculation that Jerry, together with another
\nIBRA deputy chairman Mahmudin Jassin, resigned due to increased
\npolitical interference with the agency.<\/p>\n
But Jerry has dismissed such speculation.<\/p>\n
IBRA controls the ownership of 11 banks, including the
\npublicly-listed: Bank Central Asia (BCA), Bank Niaga, Bank
\nDanamon, Bank Bali, Bank Lippo, Bank Internasional Indonesia
\n(BII) and Bank Universal; as well as non-listed banks: Bank Artha
\nMedia, Bank Prima Express, Bank Bukopin and Bank Patriot.<\/p>\n
The first four publicly-listed banks are called the
\nnationalized banks, with government ownership (via IBRA) at
\naround 90 percent, while the remaining seven banks are called the
\nrecapitalized banks, with government ownership ranging between 50
\npercent to 80 percent.<\/p>\n
Bank Indonesia requires that all domestic banks must have a
\nminimum 8 percent CAR level by the end of 2001 or risk closure.<\/p>\n
Banks must also have an NPL of not more than 5 percent by the
\nend of the year.<\/p>\n
IBRA officials have admitted that from the 11 banks under its
\nmanagement, BII and Bank Universal still have CARs lower than 8
\npercent, but higher than the current minimum of 4 percent.<\/p>\n
The steady increase in the central bank's benchmark interest
\nrate and the weakening rupiah have made the climate unfavorable
\nfor the recovery of the newly restructured banks.<\/p>\n
There have been rumors that Bank Universal is planning to
\nmerge with BCA, while Bank Lippo is eying a partnership with
\nseveral other IBRA-controlled banks in order to form a bigger
\ninstitution.<\/p>\n
Last year, Lippo reportedly proposed to the government the
\nformation of the so-called Power Bank, which would merge several
\nbanks under IBRA's control.<\/p>\n
Fears that IBRA or the government would force banks to merge
\narose after some government and Bank Indonesia officials said
\nthat the industry was still crowded with too many banks, of which
\nthere are 150 in total.<\/p>\n
There have been plans to restructure the banking sector to
\nmake it leaner but stronger, leaving only around 15 core banks
\nand 20 focus banks by the end of 2003, but no follow-up action
\nhas been taken.<\/p>\n
The government has closed around 66 banks since the economic
\nand banking crisis began in the middle of 1997. (rei)<\/p>",
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