Bank recapitalization is on track: Officials

JAKARTA (JP): Minister of Finance Bambang Subianto and Bank Indonesia Governor Sjahril Sabirin reassured the public on Monday that the government's bank recapitalization program was proceeding as scheduled.

Sjahril said owners of the nine private banks joining the recapitalization program had guaranteed their ability to provide their 20 percent of recapitalization funding.

"The controlling shareholders of the banks are ready with the additional funding needed," he said following a closed-door meeting on the recapitalization program with members of House Commission VIII for the state budget and finance.

Several newspapers have run reports questioning the bank owners' ability to come up with the necessary financing as scheduled, causing fears the recapitalization program could be delayed.

Sjahril said as soon as the recapitalization contract agreement was completed, the banks would be expected to sign them.

The government is planning to provide up to 80 percent of the recapitalization funding for nine private banks, including publicly listed Bank Lippo, Bank Niaga, Bank International Indonesia, Bank Bali and Bank Universal.

Controlling shareholders of the nine banks must provide at least 20 percent of the needed recapitalization funding. Listed banks plan to launch a rights issue to raise their share of the funding.

Bank owners must come up with the required funds by April 21 or risk closure.

Bambang also said on Monday the government was not planning to merge Bank Lippo, Bank Niaga, Bank Bali, Bank Universal and Bank Bumiputera into a so-called "Power Bank" as was reported by the press.

"As of now, the government's economic team has never discussed the idea of forming a 'power bank.'"

He added the reports had raised concerns the government was revising its bank recapitalization strategy.

Bankers earlier said a forced merger of the banks could put the bank recapitalization program off track.

Bambang also said the bad assets of the recapitalized banks would be transferred to the asset management unit of the Indonesian Bank Restructuring Agency. The unit will sell the assets, with the proceeds of the sales being used to help finance the repurchase of government shares in the recapitalized banks.

Bank Indonesia director Subarjo Joyosumarto said the government would sell its shares in the banks at market price in three years time.

"We're not going to invest in the banks forever," he said, adding the government eventually was expected to profit from the money it spends on the recapitalization program.

The government is expected to raise some Rp 300 trillion (about US$35 billion) to finance the recapitalization of the nine private banks and state banks through the issuance of bonds.

The interest rates on the bonds would amount to Rp 34 trillion in the first year. The state budget would cover half of this cost and the remaining money would be raised from the sale of assets belonging to closed banks.

The government closed 38 banks on March 13 in a bid to clean up the messy banking industry. The closures were initially scheduled for Feb. 27 but were postponed at the last minute, raising concerns over the credibility of the government's bank restructuring program. (rei)