Bank Rama needs Rp 262 billion for recapitalization program

Bank Rama needs Rp 262 billion for recapitalization program

JAKARTA (JP): Publicly listed Bank Rama announced on Monday
that it would need Rp 262 billion (about US$35 million) to boost
its capital adequacy ratio (CAR) to the desirable level.

President Putu Antara said the bank's CAR level was found to
be minus 24.61 percent in an audit by an independent foreign
accounting firm.

"We will finance our recapitalization program through a rights
issue," he announced following an extraordinary shareholders
meeting.

He explained that the government would act as a standby buyer
to absorb 80 percent of the new shares issue, while the remaining
20 percent would be offered to founders and the public.

The government requires that the country's battered banks have
a minimum CAR level of 4 percent by the end of this year.

The government plans to provide up to 80 percent of the
recapitalization funding requirement by issuing bonds, but fresh
money injected into recapitalized banks will only come from the
shares, the rate of which has yet to be decided. The remaining
20 percent funding requirement will have to be provided by the
banks.

Banks eligible to join the government recapitalization program
are those which have CAR levels of between minus 25 percent and
less than 4 percent.

Banks planning to join the recapitalization program must also
submit their business plans, including measures to bring their
CAR level to the minimum requirement of 8 percent by the end of
1999.

Putu said Bank Rama had submitted its business plan to the
central bank, which was expected to give its approval soon.

He explained that by joining the recapitalization program,
Bank Rama had targeted its CAR level to increase to more than 8
percent after 2001, with a return on equity (ROE) level above
time deposit interest rates to allure investors to purchase the
government's stake in the bank. Thwe government will gradually
sell its stake after 2001. (rei)