Bankers call for delay in liquidity support repayment
JAKARTA (JP): The Federation of Indonesian Private Domestic Banks (Perbanas) has urged for the extension of a deadline given to banks recently suspended and nationalized by the government to settle their massive debts to Bank Indonesia, the central bank.
Lawyer Rasjim Wiraatmadja said on behalf of the federation on Saturday that it would be impossible for the banks to meet the deadline.
"No bank will be able to meet the deadline. The government should give more time for them to repay the liquidity support," Rasjim said on the sideline of the federation's extraordinary congress, which, among others, revamped its leadership and discussed its position in facing the government's harsh measures in restructuring the country's ailing banking industry.
The government set Sept. 21 (Monday) as the deadline for the 14 suspended and nationalized banks to repay the liquidity support extended by the central bank to help them meet withdrawals by panicked depositors. The amount of the bailout fund extended to each bank is mostly equivalent to a bank's total assets.
Bank Niaga president's, Gunarni Soeworo, who is also Perbanas' new chairwoman, and Bank Bali's president Rudy Ramli said Bank Indonesia's operation to provide liquidity support to cash- strapped banks was a normal practice in the banking world.
Therefore, the banks should not be blamed for taking the liquidity support since the central bank, as a last-resort lender, was obliged by law to support banks in dealing with a run on them.
"The government should stay with the presumption of innocence in dealing with the banks which accepted the liquidity support," Gunarni said.
"The provision of the liquidity support is part of the government's obligation to guarantee deposits," Rudy added.
Bank Indonesia has extended massive liquidity support of more than Rp 140 trillion (US$12 billion) to dozens of banks to help them meet withdrawals by panicked depositors.
The banks had been put under the supervision of the Indonesian Banking Restructuring Agency (IBRA).
IBRA's chairman, Glenn MS Yusuf, said earlier the banks which had to repay the liquidity support by Monday included 10 suspended banks and four nationalized banks.
The 10 suspended banks are Bank Kredit Asia, Bank Surya, Bank Subentra, Bank Pelita, Hokindo Bank, Deka Bank and Centris International Bank, Bank Umum Nasional, Bank Dagang Nasional Indonesia and Modern Bank. The first seven banks were suspended on April 4, and the last three banks on Aug. 21.
The four nationalized banks are Bank Central Asia (BCA), Bank Danamon, Bank PDFCI and Bank Tiara. BCA and Danamon are the country's largest and second largest private banks respectively.
Recover
Glenn said the 14 banks were also obligated to recover the borrowings to their affiliated companies where the amount had exceeded the legal lending limit.
A bank is only permitted to give 20 percent of its capital to its affiliates, while those banks mostly extended up to 80 percent of their loans to their affiliated companies. Most parts of the intergroup loans should be recovered to enable the banks to meet the legal lending limit.
Owners and executives of some of the banks have been summoned by the Attorney General's Office and the police for investigation.
Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita had said earlier that if the banks failed to pay their obligation to the central bank by Sept. 21 , the government would seize their assets.
Other senior government officials have also threatened to start commercial proceedings if owners could not recover the borrowings to affiliated companies.
Rasjim said the obligation set by IBRA for the 14 banks to repay the liquidity support by today was baseless in legal terms because when the liquidity support was extended, the banks and the central bank did not make any agreement on the deadline.
The liquidity should be repaid by the banks but they should be given ample time to do that, he said. (jsk)