Banks opened to overseas investment

Banks opened to overseas investment

JAKARTA (JP): Minister of Finance Bambang Subianto said Monday
that foreign investors would be treated equally with local
investors in the opportunity to acquire ailing local banks.

The minister said participation of overseas investors in the
restructuring of the troubled banking sector was essential
because of the substantial funding required to clear up its
problems.

"We will invite foreign investors to participate in the
restructuring of our banks," he told journalists following a
meeting with a delegation of Japan's Kansei Economic Federation
(Kankeiren) Monday.

Chairman of Indonesia's Chamber of Commerce and Industry
(Kadin) Aburizal Bakrie urged the government last week to
prioritize local investors in the purchase of confiscated assets
of troubled banks.

But Bambang said the amount of money to recapitalize the
ailing banks would be large because the level of nonperforming
loans was estimated to reach 50 percent of more than Rp 600
trillion in outstanding loans, equivalent to more than 40 percent
of the gross domestic product.

He told the Japanese delegates the assets would be transferred
to the government-sponsored Asset Management Unit (AMU), which is
under the Indonesian Bank Restructuring Agency (IBRA).

Bambang said the government was revising the country's banking
law to abolish the foreign ownership limitation for local banks,
currently set at 49 percent.

It has also employed international accounting firms to audit
local banks to ensure foreign investors will have a reliable
information system in making their judgments, he added.

The government recently suspended the operation of three banks
and took over the shareholding of four others, including the
country's largest banking institution, BCA, and Bank Danamon, in
its first major efforts to rehabilitate the sector.

The seven banks had received Bank Indonesia liquidity support
equivalent to more than 500 percent of their capital. They are
believed to have channeled 70 percent to 100 percent of the funds
to affiliated business groups.

Bambang said the government's priority was to recover the
liquidity support and return the intra-group related lending to
the maximum limit of 20 percent as soon as possible. (rei)