Bankers told to pay debt in one year

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)