BCA fit-and-proper tests deadline Monday: BI

Berni K. Moestafa, The Jakarta Post, Jakarta

The four final bidders for Bank Central Asia (BCA) have until today to complete all documents needed to pass Bank Indonesia's fit and proper tests, marking the first hurdle in the last stage of selling a 51 percent stake in BCA.

Bank Indonesia said bidders who failed to submit all necessary documentation by Monday would be excluded from its fit and proper test.

As of last Friday, all four bidders were reportedly short of a number of documents that the central bank requires for the tests.

The Indonesian Bank Restructuring Agency (IBRA), which is in charge of the BCA sale, said it would comply with Bank Indonesia's deadline, and not seek to extend it to buy bidders more time.

"We will respect their wish to have it done by Monday. They have already discussed it (the deadline) with us," said Soebowo Musa, deputy chairman for the Bank Restructuring Unit, the IBRA division handling the BCA sale.

If they fail the fit and proper tests, bidders will not be permitted to proceed to the next round of tests, which will be overseen by IBRA.

Soebowo expressed optimism that all bidders would manage to submit the necessary documentation on time.

IBRA and Bank Indonesia refused to specify which documents had not yet been prepared.

All four of the final bidders are consortia, two of which are foreign-led.

They are the British based Standard Chartered Bank consortium and the U.S. investment firm Farallon Capital Management consortium.

The Bank Mega and GKBI consortia are the two other, locally- led bidders.

As part of the fit and proper test process administered by Bank Indonesia, prospective owners of local banks must undergo a series of 'administrative' tests and interviews, including the provision of documentation detailing the full identities of the bidders.

This is designed to weed out the names of those who have been blacklisted from controlling local banks, and to ensure that future owners are of good standing.

Amid suspicion that BCA's former owner, the Salim Group, blacklisted by both the central bank and the government, is seeking to regain control of BCA, the administrative test is the only barrier that stands between Salim and the bank.

IBRA only requires bidders to sign a warrant stating they have no links with Salim or its affiliates.

Bank Indonesia Governor Sjahril Sabirin said the central bank was seeking to uncover the identities of the bidders' shareholders.

This process, he said, would require bidders to reveal their funding sources, including for bidders configured as investment firms.

Apart from filtering out Salim-backed funding sources, Bank Indonesia also bans bidders from raising funds from domestic loans and money laundering activities.

As of last week, not all bidders had disclosed details of their funding sources, with the Bank Mega consortium still refusing to name any of its bidding partners.

Another mandatory document which, although less important, has sparked confusion among bidders is the letter of undertaking.

This document states that the bidder is willing to inject capital into BCA should the bank run into liquidity problems.

Sources well-acquainted with the process said some bidders had refused to sign the letter until after they had assumed full control of BCA.

This causes complications for bidders arranged into consortia, because winning a single majority share of the 51 percent stake in BCA may not be enough to effectively control the bank.

The letter of undertaking has since been downgraded to a 'letter of comfort', which carries the same stipulation but is not legally binding.

After checking bidders' documents, Bank Indonesia must also interview the bidders to assess their plans for BCA.

Bank Indonesia said the future owner of BCA must show a commitment to healthy banking operations.

IBRA took over BCA partly because gross mismanagement of the bank had compelled the government to bail it out.

Under Salim's ownership, most of BCA's loans were channeled to affiliates, which went bust in the fallout of the 1997 economic crisis.

With the current deadline for submitting the fit and proper test documents, Bank Indonesia should be able to finalize the testing process by March.

Sjahril said the central bank would need 30 days at the most, but said he was confident of completing it far sooner.

For its part, IBRA has said it would take about two weeks from the finalization of the central bank's testing process to determine the winning bidder.

Main requirements: a. a legal entity or an individual; b. recommendation from related authorities for foreign bidders; c. audited financial statements for the last three years; d. a statement of ultimate ownership of the legal entity; e. company ownership structure

Other requirements:

a. local investor must prove it has own funding; b. a statement of willingness to inject capital into the bank in case of liquidity problems; c. a statement of commitment to the development of healthy banking operations; d. a personal statement on bankruptcy ; e. not blacklisted from bank ownership or submit a statement pledging to manage the bank with care; f. a statement on the source of funding guaranteeing funds do not come from domestic loans, nor from money laundering activities g. legal entity act and the latest changes in it; h. documents on the board of executives of the legal entity