IBRA told to close more banks<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Remarks by Bank Indonesia (BI) officials that two of the five
\nbanks under the supervision of the Indonesian Bank Restructuring
\nAgency (IBRA) were not qualified for a planned merger should
\nserve as a signal for the agency to exclude both from the merger
\nprogram altogether.<\/p>\n
Throwing his weight behind the central bank, banking analyst
\nDrajat Wibowo said that, at this point, liquidation would be just
\nfine for the weak banks.<\/p>\n
\"The truth is, as BI says, the banks should be liquidated,\" he
\ntold The Jakarta Post on Thursday.<\/p>\n
His comments came amid mounting disagreement between Bank
\nIndonesia and IBRA officials over the number of banks that should
\nbe merged under the agency's scheme.<\/p>\n
Without naming the specific institutions, Bank Indonesia
\nofficials recently stated that two of the five banks were in a
\nprecarious financial condition and, thus, hardly eligible for a
\nmerger.<\/p>\n
Drajat agreed. \"My feeling is that things will only get worse
\nif the merger plan incorporates all five banks, because the bad
\nones would most certainly drag down the good ones.\"<\/p>\n
As part of efforts to restructure the Indonesia's troubled
\nbanking industry, IBRA plans to merge five banks -- Bank Bali,
\nBank Universal, Bank Artha Media, Bank Prima Express, and Bank
\nPatriot.<\/p>\n
Except for Bank Bali, the other four banks were supposed to
\nhave been closed down by the government late last year, as their
\ncapital adequacy ratios (CAR) were below the central bank's eight
\npercent minimum requirement.<\/p>\n
But the government spared them the ax, saying the banks would
\ninstead be merged, before being put under IBRA supervision. The
\nagency is in charge of restructuring the country's hobbled
\nbanking industry.<\/p>\n
Measuring a bank's health, CAR is a ratio between capital and
\nits risked, weighted assets, including loans.<\/p>\n
IBRA Chairman I Putu Ary Suta has insisted that the five banks
\nshould be merged, saying that closing two of them would simply
\ncreate yet another burden on the government, which must guarantee
\nthe obligations, including depositors' money, of closed down
\nbanks.<\/p>\n
In addition, the closing of the banks would have negative
\npsychological impact on the financial business community.<\/p>\n
But Bank Indonesia said that the two unqualified banks were
\nsmall banks with limited number of depositors, so closing down
\nthe banks should have no major adverse impact.<\/p>\n
Elsewhere, Drajat added that BI and IBRA should soon settle
\ntheir differences over the matter since it would only make the
\nmerger plan take even longer to finalize.<\/p>\n
\"Because a prolonged disagreement would only slow down the
\nrestructuring process in the banking sector, BI and IBRA should
\ncoordinate better to minimize the risks.\"<\/p>\n
The merger plan is seen as a necessary way of consolidating
\nthe banking sector, which is widely blamed for the country's slow
\nprogress in economic recovery since the crisis of 1997-1998.<\/p>\n
Another analyst, meanwhile, said that the long, drawn-out
\nnature of the plan reflects IBRA's clear lack of vision.<\/p>\n
\"They lack a solid concept, that's for sure; there are also
\ntoo many interests involved,\" Elvin Masassya said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ibra-told-to-close-more-banks-1447893297",
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