Ax to fall on ailing banks on Feb. 27
Ax to fall on ailing banks on Feb. 27
JAKARTA (JP): President B.J. Habibie said on Thursday that the
government would close down a number of ailing banks on Feb. 27
as part of its program of cleaning up the country's crowded and
weak banking industry.
The president did not name the banks but said that all private
banks with a capital adequacy ratio (CAR) of less than minus 25
percent would be closed down.
He said on Thursday that this group of banks could no longer
be rescued.
"The government will liquidate the banks in category C on
February 27," he told reporters after meeting with the Indonesian
Chamber of Commerce and Industry on Thursday. "This is not idle
gossip. This is for real," he added.
The government has divided the country's some 200 commercial
banks on the basis of their CAR level. Category A banks are those
with a CAR equal to or above 4 percent, category B banks are
those with a CAR of between less than 4 percent and minus 25
percent, and category C banks are those with a CAR of less than
minus 25 percent.
CAR is the ratio between paid up capital and risk-weighted
assets. Banks, which are eligible to join the government bank
recapitalization program are those listed in category B.
However, Bank Indonesia Governor Sjahril Sabirin said
separately on Thursday that the government has not set any
specific date on when the bank closures would be announced.
He admitted that the announcement would be made some time
after the 26th of February following approval of the government
state budget proposal by the House of Representatives.
"I hope the public will not panic as all deposits are
guaranteed by the government," he told reporters on the sidelines
of a hearing on the bank recapitalization program with the House
of Representatives Commission VIII on state budget and finance.
The state budget covers part of the government's bank
recapitalization costs.
"We hope we can move fast with the liquidation measure," Bank
Indonesia director Soebardjo Djojosoemarto told reporters on the
sidelines of the hearing.
He said that 38 banks including seven state banks and several
provincial development banks were in category C.
He said that the government would recapitalize the state banks
and the provincial development banks regardless of their CAR
status.
He added that some 66 banks were in category B, and 62 banks
were in category A.
He also said that banks in category B would not necessarily be
recapitalized as the banks had to meet several criteria including
production of a feasible business plan which contains measures to
lift the CAR level to 8 percent by 2001, settling the banks'
outstanding loans, meeting a legal lending limit, and the
repayment of Bank Indonesia liquidity support given to them.
The owners and the management must also pass the 'fit and
proper' test.
"They must not be included in our blacklist of bad bankers,"
Soebardjo pointed out.
The last requirement to join the recapitalization program was
that the owners had to come up with 20 percent of their funding
needs in cash, as the government would provide up to 80 percent
of the remaining funding by issuing bonds, he said.
He added that category B banks failing to meet the
recapitalization requirements would also be closed down.
Soebardjo stressed that the government would have the same
rights as the other shareholders in the recapitalized banks.
"We won't provide the recapitalization funds if we don't have
the same rights," he said.
Several government officials have earlier said that the
government's 80 percent share ownership in the recapitalized
banks would entail non-voting rights. (rei/prb)