Bankers face difficulties raising cash

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)