Bank Niaga recapitalization cost soars
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)