RI's bank reform delay prolongs distress: Thomson<\/p>\n
HONG KONG (Dow Jones): Thomson BankWatch said Friday that
\nIndonesia's sovereign risk rating stands at CCC and that the
\noutlook for the country is stable.<\/p>\n
The government last week postponed the deadline for closing
\nabout 40 distressed banks saying it needed more time to evaluate
\nindividual bank recovery plans.<\/p>\n
Thomson sovereign risk analyst, Anand Adiga, said "whatever
\nthe reason for the delay, it only prolongs the distress in the
\nbanking sector and does nothing to dispel the fears of political
\ninterference in banking sector reform."<\/p>\n
The delay in closing the banks also makes it difficult for
\nseveral banks to proceed with capital-raising exercises, such as
\nrights issues, Thomson said.<\/p>\n
"This ongoing uncertainty is making it difficult for banks to
\nproceed with needed capital-raising exercises, and previously
\nannounced rights issues by several banks have all been postponed
\nin recent days until the government makes its final decisions,"
\nAdiga said.<\/p>\n
Multilateral funding agencies have opposed the delay in
\nclosing banks and the International Monetary Fund has warned it
\nmight delay the next tranche of its US$43 billion bailout
\npackage, Thomson said.<\/p>\n
The country needs about Rp 300 trillion (US$33.7 billion) to
\nrecapitalize its banks, and given the weak economy and the
\nnation's political problems, the government is not likely to be
\nable to supply all the money needed.<\/p>\n
Since most foreign investors are likely to remain cautious
\nuntil at least the June 7 elections, the country will continue to
\nbe heavily dependent on official assistance from both
\nmultilateral and bilateral donors.<\/p>\n
The IMF has indicated that it might consider increasing its
\ncurrent bailout package; the World Bank and the Asian Development
\nBank are also pondering guaranteeing Indonesian sovereign debt
\nissues, which would significantly lower the interest premium the
\ngovernment would have to pay.<\/p>\n
On the corporate debt restructuring side, recent rulings by
\ncommercial courts have gone in favor of debtors, which could
\ndiminish the incentive for distressed corporates to restructure
\ntheir obligations.<\/p>\n
In addition, political tension is rising, with religious and
\npolitical riots in several districts.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ris-bank-reform-delay-prolongs-distress-thomson-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}