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)