IBRA plans to develop four 'core banks'<\/p>\n
JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA)
\nplans to develop four \"core banks\" with strong capital and large-
\nscale business in a bid to establish a strong banking industry.<\/p>\n
IBRA chairman Edwin Gerungan said on Wednesday that the core
\nbanks would consist of two state-owned banks and two private
\nbanks under the agency's supervision.<\/p>\n
\"Two banks under IBRA have the potential to become core
\nbanks,\" Edwin said in presentation material distributed during a
\nhearing with the House of Representatives commission IX for
\nfinancial and development planning affairs that was also attended
\nby Finance Minister Prijadi Praptosuhardjo, and Bank Indonesia
\ntop officials.<\/p>\n
He did not name the banks. But of the 11 private banks under
\nthe control of IBRA, publicly listed Bank Central Asia (BCA) and
\nBank Danamon are considered the largest in terms of assets, and
\nthey have strong capital.<\/p>\n
Of the country's four state banks, Bank Mandiri and Bank
\nRakyat Indonesia (BRI) are considered to be the largest. Bank
\nMandiri plans to go public later this year, and the government
\nhas also planned to privatize BRI in the future.<\/p>\n
Edwin said that the plan to form the core banks was part of
\nthe agency's proposal to consolidate the domestic banking sector
\nand to create strong national banks.<\/p>\n
Although the government has closed down some 70 banks since
\nthe financial crisis started in the middle of 1997, the remaining
\n149 are still considered too many.<\/p>\n
IBRA is an agency of the finance ministry, established in
\nearly 1998 with a mission to help restructure the banking sector.
\nThe agency's mandate, which includes selling off all government
\nshares in IBRA banks, will end in 2004.<\/p>\n
Under the IBRA scheme, the total assets of the individual core
\nbanks would reach more than Rp 100 trillion (US$9 billion),
\noffering an extensive range of banking products and services both
\nto retail and corporate customers, and equipped with solid
\nbanking technology.<\/p>\n
IBRA deputy chairwoman for bank restructuring Felia Salim said
\nthat one of the core bank candidates already had assets of around
\nRp 100 trillion, while the three other banks had assets of
\nbetween Rp 50 trillion and Rp 100 trillion.<\/p>\n
Felia said that under the IBRA proposal, the core bank
\ncandidates could acquire weaker and smaller banks to increase
\ntheir assets, without the risk of a deterioration in their
\ncapital adequacy ratio (CAR).<\/p>\n
A bank's CAR is the ratio between its risk-weighted assets and
\ncapital. The higher the latter, the more secure is the bank's
\nfinancial position.<\/p>\n
\"Only a few banks under IBRA have a strong balance sheet and
\nsufficient scale, the rest are relatively weak and face serious
\nstructural problems,\" the IBRA document said.<\/p>\n
The agency said that this group of smaller banks could be
\nmerged with the core banks as they did not have strong enough
\nbalance sheets to make acquisitions in their own right.<\/p>\n
Bank Indonesia deputy director for banking research and
\nsupervision Djoko Sarwono said that there were around eight banks
\nthat might not be able to meet the year-end minimum 8 percent CAR
\nrequirement, including five IBRA banks. He declined to name
\nthem.<\/p>\n
Banks which fail to meet the minimum CAR requirement risk
\nbeing closed down.<\/p>\n
The remainder of the 11 IBRA banks are publicly listed Bank
\nInternasional Indonesia, Lippo Bank, Bank Universal, Bank Bali,
\nBank Niaga, and non-listed Bank Bukopin, Bank Artha Media, Bank
\nPrima Express, and Bank Patriot.<\/p>\n
Under the IBRA banking consolidation proposal, medium-sized
\nbanks with total assets of between Rp 10-50 trillion could be
\ndeveloped into special banks focusing on a particular market
\nniche.<\/p>\n
\"The banking consolidation currently being handled by IBRA
\ncould result in a stronger banking system,\" Edwin said.<\/p>\n
He added that the program would also rescue the smaller and
\nweaker banks, and avoid a second government recapitalization
\nprogram.<\/p>\n
The government has issued around Rp 430 trillion worth of
\nbonds to finance the country's largest ever bank recapitalization
\nprogram.<\/p>\n
But as the banking environment and macroeconomic situation
\ncontinue to worsen, some banks are facing capital deterioration
\nthat may force the government to spend more of the taxpayers'
\nmoney to recapitalize them.<\/p>\n
Djoko said, for instance, that recapitalizing the five banks
\nthat might fail to meet the year-end CAR requirement would cost
\nsome Rp 8.3 trillion, but closing them down would cost the
\ngovernment more than Rp 17 trillion, because the government would
\nhave to cover the obligations of the closed banks, particularly
\nthird-party deposits, as a consequence of the government bank
\ndeposit guarantee scheme. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ibra-plans-to-develop-four-core-banks-1447893297",
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