Bank Niaga recapitalization cost soars

JAKARTA (JP): The recapitalization cost of publicly listed Bank Niaga is estimated to soar to around Rp 9.3 trillion (US$1.23 billion) from an earlier estimate of Rp 8.6 trillion, according to senior deputy chairman of the Indonesian Bank Restructuring Agency (IBRA) Arwin Rasyid.

Arwin said the higher cost was due to a delay in the recapitalization of the bank.

He said the delay had caused Bank Niaga an additional monthly loss of around Rp 100 billion due to a negative interest spread problem.

"We expect to be able to recapitalize Bank Niaga as soon as possible," he told reporters at a media conference.

Arwin said IBRA would first have to seek the approval of the House of Representatives for the recapitalization of Bank Niaga due to the higher cost.

He added that the agency would meet the House next month.

IBRA, a unit of the finance ministry, nationalized Bank Niaga in 1999 after its owners failed to come up with the necessary 20 percent cash requirement to help finance the recapitalization program. The government was supposed to finance up to 80 percent of the recapitalization cost.

The government initially planned to recapitalize the bank in August last year, but the outbreak of the high-profile Bank Bali scandal, coupled with the country's political instability, caused the program to be delayed.

The recapitalization program is aimed at bringing the bank's capital adequacy ratio (CAR) to more than 4 percent.

Bank Niaga announced on Thursday its net losses in 1999 jumped to Rp 5.6 trillion from Rp 3.98 trillion in 1998.

The bank said the greater loss was primarily due to a bigger interest income loss of Rp 1.59 trillion, compared with Rp 1.26 trillion in 1998.

Arwin said a further delay in the recapitalization program of the other banks would also increase their recapitalization cost.

"IBRA will do its utmost to avoid a further delay in the recapitalization of the other ailing banks," he said.

He said IBRA was determined to recapitalize the other seven smaller, nationalized banks this year.

He said the recapitalization program of these seven banks would be made through a merger process, in which the much larger Bank Danamon would acquire the smaller banks.

Arwin said Bank Danamon would be recapitalized for the second time once it had acquired the seven banks in order for the newly merged bank to have a minimum CAR level of more than 4 percent.

The government earlier recapitalized Bank Danamon, another nationalized bank.

Arwin said the second recapitalization of Bank Danamon would cost around Rp 30 trillion, but this cost would be greater if the merger process and the recapitalization program was delayed.

He said the legal merger of the bank was expected to be completed next month, while the operational merger would be done by early October.

Arwin also said the government was determined to recapitalize Bank Bali.

He reconfirmed that the former owner and president of Bank Bali Rudy Ramli had dropped his lawsuit against the agency and Bank Indonesia, which decided last year to nationalize the bank.

Meanwhile, Bank Indonesia deputy governor Subarjo Joyosumarto said the recapitalization program of Bank Bali should be completed in May.

The country's banking authority has ruled that all of the country's banks have a CAR level of at least 4 percent by June.

And by the end of 2001, the industry must have CAR level of at least 8 percent. (rei)