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)