Minimum capital ruling eases<\/p>\n
JAKARTA (JP): The government eased bank capital requirements
\nyesterday in another concerted effort to speed up the
\nrestructuring process of the country's ailing banking industry.<\/p>\n
Minister of Finance Bambang Subianto said existing banks were
\nno longer required to have a minimum paid-up capital of Rp 250
\nbillion (US$16.12 million) by the end of this year.<\/p>\n
\"Only new banks are now obliged to meet this capital
\nrequirement,\" Bambang told reporters after the first meeting of
\nthe Economic and Monetary Resilience Council under President B.J.
\nHabibie's Cabinet.<\/p>\n
The council was set up in January under the Soeharto
\nadministration to monitor the implementation of reform measures
\nalready agreed to with the International Monetary Fund (IMF). The
\ncouncil includes all ministers with economic portfolios under the
\nleadership of Coordinating Minister of Economy, Finance and
\nIndustry Ginandjar Kartasasmita.<\/p>\n
Bambang added that the capital adequacy ratio (CAR) -- against
\nrisk-weighted assets -- for banks was also lowered so that they
\nwere now required to fulfill a minimum CAR of only 4 percent by
\nthe end of this year, 8 percent by the end of 1999 and 10 percent
\nby the end of 2000.<\/p>\n
\"This is part of the overall effort to revive the economy and
\nthe banking sector in particular,\" Bambang said.<\/p>\n
The previous CAR requirements were 8 percent by the end of
\nthis year, 10 percent by the end of next year and 12 percent by
\nthe end of 2000.<\/p>\n
Indonesia set tough minimum paid-up capital requirements of
\nbetween Rp 1 trillion and Rp 2 trillion last January in an effort
\nto force ailing banks to merge.<\/p>\n
But the Rp 1 trillion requirement was later slashed down to Rp
\n250 billion following strong objections from the banking
\ncommunity and the dateline for the Rp 2 trillion requirement was
\nextended to the year 2000.<\/p>\n
Bambang urged owners of the country's ailing banks to
\naccelerate the process of recapitalizing their institutions to
\nmeet the capital requirements.<\/p>\n
\"The government is opening the opportunity both to local and
\nforeign investors to become bank shareholders, and even majority
\nowners,\" he said, pointing out that amendments to the Banking Law
\nwould soon be proposed to the House of Representatives (DPR) to
\nallow foreigners to control local banks.<\/p>\n
He said that to accelerate the bank restructuring process, the
\ngovernment would segregate bad debts from ailing banks and put
\nthem under a special management entity.<\/p>\n
The government will hand over the management of troubled banks
\nto those who have the expertise and international credibility to
\nheal them, and will allow them to become shareholders, he added.<\/p>\n
Bambang stressed that Bank Indonesia remained the only
\ninstitution in charge of supervising banks, including those being
\ntaken care of by the Indonesian Bank Restructuring Agency (IBRA).<\/p>\n
\"IBRA is assigned only to restructure ailing banks and to
\nspeed up the recovery of Bank Indonesia's liquidity credits
\nalready injected into problem banks.\"<\/p>\n
The central bank has thus far pumped more than Rp 132 trillion
\nin liquidity credits into the country's banking sector. There are
\nnow more than 45 problem banks being restructured by IBRA.<\/p>\n
\"To clarify the role of IBRA, the government will revise the
\nPresidential Decree on the establishment of IBRA,\" he said,
\nindicating that there would be changes on how the agency would
\noperate.<\/p>\n
\"To facilitate a quick restructuring process, we expect good
\ncooperation from the public by remaining calm and not being
\neasily misled by rumors.\"<\/p>\n
He reaffirmed that deposits would remain safe in Indonesian
\nbanks under the government's blanket guarantee scheme introduced
\nlast January.<\/p>\n
Not resigning<\/p>\n
Ginandjar, who accompanied Bambang at the news conference
\nyesterday, flatly denied rumors that he would resign from
\nHabibie's Cabinet immediately after the conclusion of current
\nnegotiations with the IMF.<\/p>\n
\"I have no intention whatsover of leaving as long as the
\nPresident wants me to help him,\" Ginandjar said in reply to
\nquestions from reporters about the rumors over the past few weeks
\nthat he would quit sometime next month.<\/p>\n
Ginandjar announced immediately after the Cabinet's
\ninstallment late last month that he considered the Habibie
\nCabinet a transitional one until a newly elected government was
\nset up.<\/p>\n
Commenting on World Bank economist Jean-Michel Severino's
\nprediction that Indonesia's economy would contract 15 percent
\nthis year, Ginandjar said the figure was too pessimistic.<\/p>\n
\"I don't think I subscribe to that figure,\" he said, citing
\nother analysts' predictions that put the country's negative
\ngrowth at a range between 5 percent and 20 percent.<\/p>\n
Ginandjar avoided directly answering questions on whether the
\ngovernment was considering asking for a rescheduling of its
\nforeign debt payment in view of its huge budget burden in meeting
\nincreased subsidy spending.<\/p>\n
\"We and the IMF are considering all options for meeting our
\nbudgetary needs and the foreign debt is one of the options. But I
\ndon't want to create the impression that we are heading in that
\ndirection (debt rescheduling).<\/p>\n
\"But as I understand, the IMF is considering all options to
\nhelp us meet our needs for external resources. It is not an
\nactive proposition on our side,\" Ginandjar added.<\/p>\n
But he conceded that the budget deficit for the current fiscal
\nyear would most likely be much larger than an earlier estimate of
\n3.5 percent of the gross domestic product.<\/p>\n
He said the government's priority now was to establish social
\nsafety net programs to meet basic public needs and to create jobs
\nto revive the economy through the recapitalization of small
\nbusinesses, the revitalization of exports and the promotion of
\nagroindustry and tourism. (prb\/rei)<\/p>",
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