Bank recapitalization is on track: Officials

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)