Bank Bali recapitalization approved

JAKARTA (JP): The House of Representatives finally approved on Saturday the government's proposal to recapitalize publicly listed Bank Bali at a cost of Rp 5.3 trillion (US$592.18 million).

The House also allowed the Indonesian Bank Restructuring Agency (IBRA), a unit under the finance ministry, to pay former Bank Bali owner and CEO Rudy Ramli Rp 9 billion in compensation for losses he has suffered since the bank was nationalized by the agency last year.

The approval was given at a hearing between the Ministry of Finance and House Commission IX on banking and state budget that lasted from 8 p.m. on Friday until nearly 4 a.m. on Saturday. The House also approved the proposal to recapitalize state-owned Bank Rakyat Indonesia (BRI) and Bank Tabungan Negara (BTN) during the session.

Bank Bali will launch a rights issue in October to facilitate the recapitalization program, and the government will be a standby buyer.

While there was not much debate on BRI and BTN's recapitalization plan, the approval of Bank Bali's recapitalization was reached only after long hours of debate.

Legislators initially feared that Rudy would still take legal action to demand back his ownership in the bank once the government had completed the recapitalization program, despite a recent out-of-court settlement.

The government nationalized Bank Bali last year after its owner failed to come up with the necessary cash requirement to help finance the recapitalization.

Rudy then filed a suit against the decision, and the Jakarta Administrative Court ruled in favor of Rudy. IBRA then lodged an appeal.

The legal dispute had caused further delays in the bank's recapitalization program.

But IBRA then reached an out-of-court settlement with Rudy, in which IBRA would pay him Rp 9 billion in compensation. But in return, Rudy would not continue the suit and would no longer demand return of his ownership in the bank.

The House then decided that the government must obtain a court ruling which would include the recent out-of-court settlement with Rudy before it recapitalizes Bank Bali.

Legislators also initially rejected the plan to pay Rudy the Rp 9 billion compensation.

Legislator Zulfan Lindan said that such a policy would create a bad precedence.

But IBRA chairman Cacuk Sudarijanto said that the compensation agreement was part of the overall package, pointing out that Rudy would not drop his suit if the compensation was not paid.

"The Rp 9 billion compensation is a reasonable amount for an out of court settlement," Cacuk told legislators.

Head of commission IX, Sukowalujo Mintoraharjo, said that recapitalizing the bank was less costly than liquidating the bank.

The government had said that it would need to provide nearly Rp 7 trillion in cash if Bank Bali was closed, to pay for the time deposits in the bank guaranteed by the government and for severance payment of the bank's employees.

In contrast, the government would only have to inject bonds to finance the bank's recapitalization program.

The government initially estimated the Bank Bali recapitalization program would cost Rp 4.9 trillion if it was implemented in June.

The recapitalization approval of Bank Bali, BRI and BTN would pave the way for the government to complete the country's crucial bank recapitalization program.

Meanwhile, the Capital Market Supervisory Agency' (Bapepam) chairman, Herwidayatmo, said that Bapepam would freeze the rights of Germany-based investment firm Deutsche Bourse Clearing (DBC) AG from participating in Bank Bali upcoming rights issue.

DBC is believed to have amassed more than 50 percent of Bank Bali's shares. But until know, the investors behind DBC and their intention with Bank Bali has never been clear.

Herwidayatmo said that Bapepam would continue to investigate who the investors were.

He also said that DBC had violated the capital-market ruling for not making a tender offer when it bought Bank Bali shares over the 20 percent limit.(rei)