Bank Mandiri's overseas operations face closure

Bank Mandiri's overseas operations face closure

JAKARTA (JP): State-owned Bank Mandiri is in danger of losing
its overseas operations if its financial status does not improve
in the near future, Bank Indonesia Deputy Governor Subardjo
Joyosumarto said on Friday.

Subarjo said monetary authorities in the United States, Hong
Kong, Singapore and Cayman Islands had threatened to close down
Bank Mandiri's branches in their respective territories.

"If the branches are closed, it will destroy our banking image
in the international market. That's why we have to recapitalize
Bank Mandiri by the end of December," Subardjo was quoted by
Antara as saying.

He said Bank Indonesia had informed the relevant overseas
monetary authorities about the government's plan to recapitalize
the bank so that they would not close down its branches.

The government and the House of Representatives agreed on
Thursday night to proceed with the costly recapitalization by the
end of this month to turn the bank into the black.

The cost of the delayed recapitalization of Bank Mandiri will
rise to between Rp 178 trillion and Rp 180 trillion, from the
initial estimate of Rp 137.8 trillion, according to a recent
audit by Arthur Anderson.

The costly recapitalization aims to raise Bank Mandiri's
capital adequacy ratio to the government-established 4 percent
minimum.

Bank Indonesia's senior deputy governor Anwar Nasution
revealed the rising cost of Bank Mandiri's recapitalization was
as a result of the delay in its implementation, initially planned
for July.

The delay itself, Anwar said, was precipitated by the
complication of merging four former state banks -- Bank Bumi
Daya, Bank Ekspor Impor, Bank Pembangunan Indonesia and Bank
Dagang Negara -- into Bank Mandiri, and the lack of coordination
between governmental offices.

Coordinating Minister of Economy and Finance Kwik Kian Gie
said the government was committed to recapitalizing Bank Mandiri,
despite the rising cost.

The government issued Rp 103 trillion worth of bonds for the
first tranche of the recapitalization fund for Bank Mandiri on
Oct. 13.

The government plans to issue new bonds to fill in the gaps in
the bank's books by the end of December. Otherwise, the cost will
rise further.

Subardjo said Bank Indonesia is ready to transfer all the
needed funds to Bank Mandiri once the finance minister signs the
government bonds to recapitalize the bank.

Bank Mandiri president Robby Djohan said the cost to
recapitalize Bank Mandiri would still be lower than the cost of
liquidating it.

If the government liquidates the bank, he said, it has to
provide Rp 170.5 trillion in rupiah funding and $8 billion in
foreign exchange to pay the bank's obligations.

In addition, the government has to pay legal costs, asset
depreciation and severance payments for the bank's 17,000
employees.

Bank Mandiri is expected to control a domestic market share of
30 percent. (rid)