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)