Bank Bali hopes to avoid management reshuffle

JAKARTA (JP): A senior Bank Bali executive is urging Standard Chartered Bank to abide by its promise not to undertake a major reshuffle in his bank's management.

Bank Bali deputy president I.G.M. Mantera said on Wednesday that the UK bank -- which recently agreed to buy 20 percent of the publicly listed bank's shares -- promised it would not reshuffle the bank's management.

"There's no reason for them (Standard Chartered) to do that because Bank Bali is already run by a good management team," he said on the sidelines of a signing agreement with state-owned international telecommunications provider PT Indosat and PT Jatis Enterprise Integration Consulting to develop an Internet-based on-line shopping service. Bank Bali will act as the payment outlet.

Standard Chartered agreed on April 22 to inject about US$56 million, which amounts to about 20 percent of the bank's recapitalization funding requirement.

It marked the first foreign participation in the country's bank recapitalization program since it was launched last year to lift banks' capital adequacy ratio to a minimum 4 percent level.

CAR is the ratio between capital and risk-weighted assets.

The government has pledged to issue bonds to finance the 80 percent funding requirement.

The government also said it would not interfere in the management of the recapitalized banks as long as they were being run prudently and were on the right track to achieve the targets of their business plans, including attaining a minimum CAR level of 8 percent by 2001.

Mantera said Standard Chartered planned to take a majority stake in Bank Bali.

Under the country's bank recapitalization program, the government expects all its stakes in the recapitalized banks to be purchased by investors in five years' time.

Bank Bali needed about Rp 2.4 trillion in recapitalization funding according to the latest audit, which is much higher than the Rp 1.8 trillion figure based on the 1998 audit.

Bank Bali president Rudy Ramli said the discrepancy primarily resulted from a different calculation method now being employed by the Indonesian Bank Restructuring Agency (IBRA).

"The 1998 audit was based on Bank Indonesia's calculation method while the latest one is based on IBRA's," he said.

"And only between 5 percent and 10 percent is caused by the deteriorating environment of the industry."

Analysts have said the current high interest rate environment, which has caused the banking sector to suffer a negative interest rate spread, would continue to erode the banks' capital condition.

Rudy said an international auditor was reauditing the bank to decide the exact amount of the bank's recapitalization funding requirement.

He said details of the bank's new shareholder structure and the exact amount of recapitalization funding required would be made available after the audit was completed.

Standard Chartered said earlier it was committed to injecting additional funding needed to have a 20 percent stake in Bank Bali.

Meanwhile, Moody's Investors Service announced a change in its outlook for ratings of Bank Bali and Panin Bank, from stable to positive.

It said the change reflected the recapitalization contribution by Standard Chartered Bank in Bank Bali, and by Australia and New Zealand Banking Group in Panin Bank, with some consequent benefits to their financial fundamentals.

Moody's believes that foreign participation is likely to improve both banks' ability to take advantage of any improvement in their operating environment.

It said Bank Bali and Panin Bank were among the best banks in Indonesia.

"However, the shortage of foreign currency in Indonesia and the crisis in the country's economy and in the rest of its financial system continues to overshadow the credit risk of the banks' obligations," Moody's said. (rei)