63 rural banks cease operating

63 rural banks cease operating

YOGYAKARTA (JP): Sixty three secondary or rural banks, known
locally as BPRs, have ceased operation, leaving Rp 300 billion
(US$40 million) of third party funds in question.

Worse still, according to the Indonesian Secondary Banks
Association (Perbarindo), the government still does not know the
whereabouts of the operators and owners of the 63 troubled banks.

Perbarindo chairman Awet Abadi said here on Wednesday that his
party would cooperate with Bank Indonesia (BI), Indonesia's
central bank, to help depositors get their money back from the
troubled banks, which have not been officially shut down.

"We, together with BI, will find the operators and owners of
these BPRs to demand they take responsibility," he told
journalists after opening Perbarindo's Yogyakarta chapter
meeting.

Perbarindo currently has 2,227 secondary bank members, with a
total of Rp 1.5 trillion in third party funds.

The 63 troubled banks represent only 2.8 percent of the
existing secondary banks, but depositors' money in these 63 banks
accounts for 20 percent of all funds held by secondary banks.

Awet said that Bank Indonesia had wanted to help troubled
secondary banks, however, most of the 63 troubled banks were
totally insolvent and it would be futile to help them.

"Bank Indonesia has said that it is committed to helping
troubled BPRs meet their obligations to depositors. But how could
it help them if it cannot find the (owners') addresses?" he
asked.

He added that BI, together with Perbarindo, would liquidate
the assets of the troubled banks and repay depositors money. If
the proceeds from the asset sales were not enough, BI would
provide bridging finance.

In a bid to improve confidence in local banks, the government
has provided a blanket guarantee for money deposited in the local
banking system.

Awet said that Perbarindo, with assistance from BI, would help
its members improve their performances. All secondary banks would
be audited to determine what steps were needed to assist the
banks and return them to health.

Meanwhile, the head of BI's Yogyakarta branch, Achil R.
Djajadiningrat, said the performance of secondary banks had been
deteriorating due to the crisis.

The combined assets of 65 secondary banks in Yogyakarta have
shrunk by 4.5 percent to Rp 83.37 billion as of the end of
September. Third party funds held by these banks also dwindled by
12.1 percent to Rp 44.48 billion. (44/rid)