Bankers told to pay debt in one year

JAKARTA (JP): President B.J. Habibie has ordered owners and former owners of the country's troubled commercial banks to repay obligations to the government in cash within one year or face stiff legal action, Frans Seda, a senior presidential economic advisor, said on Thursday.

Frans said the President had deemed one year was enough for the bankers to raise the cash to repay the liquidity support provided by the central bank totaling Rp 141 trillion (US$12.8 billion).

"The President has set a one year deadline for the debt settlement," he told reporters after meeting with Habibie.

Frans added that the President would not hesitate to take legal action against those who fail to meet the deadline.

Minister of Finance Bambang Subianto on Tuesday shocked the banking community by demanding that faulty bank owners repay their debts in cash, not in fixed-assets, ordering them to submit their asset disposal plans within a month.

Some local papers reported the next day that the government would give the delinquent bank owners five years to settle their debts, triggering a firestorm of criticism that the government was capricious in its drive to recoup the taxpayers' money.

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita also confirmed after a meeting with Habibie on Thursday that: "We all want this problem to be over as soon as possible. The government wants its money to be returned quickly and I assume the bank owners do too, because the interest rate charged on them is very high."

He added that the bank owners would continue to be banned from overseas travel until they settled their obligations.

Bambang said earlier that the government would continue charging interest (usually higher than the central bank's benchmark rate of 65 percent at present) on the liquidity loans until payment was completed.

Ginandjar admitted, however, that it was impossible to quickly sell such a large number of fixed assets at the right price amid the current economic situation.

A hasty sell would only cause the asset price to drop and this might benefit mostly foreigners who currently have enough cash, he added.

"So we have to provide them enough time. But five years is too long, and we think that one year will be enough," he said.

The government originally set a Sept. 21 deadline for the owners and former owners of 14 troubled banks to return the liquidity support.

Only the Salim Group, the former owner of the nationalized Bank Central Asia, and the Gadjah Tunggal Group, owner of the suspended Bank Dagang Negera Indonesia, met the deadline by signing binding agreements to hand over some Rp 78 trillion -- mostly in fixed assets -- to repay the liquidity support and recover intra-group lendings.

Sudwikatmono, a cousin of former president Soeharto and owner of liquidated Bank Surya, followed suit last week by agreeing to repay Rp 1.9 trillion in liquidity support.

The Indonesian Bank Restructuring Agency (IBRA) confirmed in a statement on Thursday that a government committee had approved the agreement with the controlling shareholders of the three banks.

"IBRA will work with the pledged companies to develop comprehensive asset disposal plans to ensure maximum sales value," the agency said, adding that it must approve the asset disposal plans by Oct. 31.

"Our valuations of the 121 companies pledged thus far are extremely conservative. We will have no problem recovering the government's debts in full, not to mention a healthy return premium," IBRA chairman Glenn S. Jusuf said.

Regarding the controlling shareholders of other banks that have yet to sign agreements, they would also be required to produce cash repayment plans to be approved by Oct. 31, the agency said.

"Bank owners who fail to meet the deadline will face litigation proceedings. Legal cases are currently being prepared for this possibility," it added.

Timber tycoon Mohamad "Bob" Hasan, a long-time golfing partner of Soeharto and co-owner of suspended Bank Umum Nasional, and property mogul Usman Admadjaja, ex-owner of Bank Danamon, were among those who failed to meet the Sept. 21 deadline.

Bank Indonesia had injected the liquidity support to help banks meet massive withdrawals by panicked depositors in the wake of plunging confidence in the industry. (prb/rei)