Bankers face difficulties raising cash
JAKARTA (JP): Bankers have admitted that they are facing difficulties in obtaining the required 20 percent bank recapitalization funding amid the current economic crisis.
James Riady, deputy chairman of the Lippo Group, said on Saturday that the bank recapitalization program was a "very serious and heavy" step for all the banking population, including Lippo Bank.
"Providing the cash... requires a formidable process, especially amid the current crisis. That's why we don't take the recapitalization step as simple and easy," he told The Jakarta Post on the sidelines of the maiden graduation day of Lippo's Pelita Harapan University in Lippo Karawaci.
He pointed out that for Lippo Bank, the owner must come up with Rp 1 trillion in cash in order to be eligible to join the government-sponsored bank recapitalization program.
Banks wishing to join the government bank recapitalization program, in which the government will provide up to 80 percent of the funding, are obliged to provide at least 20 percent of the funding requirement.
The recapitalization program is designed for banks which have a capital adequacy ratio (CAR) of between less than 4 percent and minus 25 percent to raise them to the 4 percent minimum level.
Banks which are eligible to join the recapitalization program but which are unable to come up with the 20 percent funding will be closed down.
The government is scheduled to announce which banks will be liquidated on Feb. 27.
Senior banker I Nyoman Moena said that securing the 20 percent in cash was not only a serious problem for large banks but also for small and medium banks.
"Raising cash amid the current hardship is very difficult," the former central bank director told The Jakarta Post.
He added, however, that banks with a good reputation should be able to secure commitments from foreign investors.
"Right now is actually the right time to buy (invest) because the price is already at rock bottom," he said.
Lippo Group chairman Mochtar Riady, however, cautioned that the government's recapitalization program might be jeopardized by the country's political conflicts.
"It is very worrying that political infighting could hamper the momentum for the bank recapitalization program," he said in his speech at the graduation ceremony.
"There may be a civil war, if the government and the military are unable to overcome the riots, unrest and anarchy...," he added.
Indonesia is embracing its newfound political freedom following the downfall of former authoritarian ruler Soeharto in May.
But social unrest has plagued several parts of the country since then as emerging new political forces have been in conflict with the old forces trying to maintain the status quo.
Many are fearful that the upcoming June general election could turn into chaos.
Mochtar said that recapitalizing and restructuring the country's messy banking sector was the key to economic recovery.
James, Mochtar's eldest son and Lippo's crown prince, said that despite the uncertainty, Lippo would join the government bank recapitalization.
The government recently received strong criticism from the House of Representatives on news that Lippo Bank would be included with 10 provincial development banks in the first batch of banks to be recapitalized, and that the bank was to receive the lion's share of the first recapitalization funding.
Some alleged that this was possible because of Lippo's owners' cozy relations with President B.J. Habibie.
The plan has since been shelved.
"It's absolutely not true. Neither Bapak Mochtar nor myself have spoken about Lippo and the recapitalization program with the President," James said.
Moena said that many of the country's 200 commercial banks would make strong efforts to recapitalize their banks and avoid liquidation.
"First, it's a matter of prestige. And second, the bank owners are fearful that their personal assets could be confiscated by the authority if the banks are liquidated," he said.
"And to some, they don't want to lose overnight what took years to built," he added. (rei/bsr)