BCA put under IBRA control after massive run

JAKARTA (JP): The country's largest bank, Bank Central Asia (BCA), has finally surrendered to the power of its depositors, who have been frantically withdrawing money, and been placed under the tutelage of the Indonesian Bank Restructuring Agency (IBRA).

Bank Indonesia Governor Sjahrir Sabirin told journalists yesterday evening that the continuing run on BCA since May 18 had resulted in liquidity problems and dried up its reserves at the central bank.

As lender of the last resort, the central bank continued to provide liquidity support to BCA to meet all fund withdrawals, Sjahril said.

"As of today (yesterday), the liquidity support has exceeded 200 percent of BCA's capital and, therefore, BCA meets the criteria to be managed and supervised by IBRA."

Sjahril, however, declined to reveal the amount of funds the central bank had injected into BCA. He only said that the calculation on BCA's capital had included half of the promised Rp 1 trillion (about US$100 million) to be injected by the majority shareholder, the Salim Group.

According to InfoBank, BCA's paid-up capital stood at Rp 2.83 trillion as of June 1997 and its total assets reached Rp 41.24 trillion.

Before giving liquidity credits to BCA, Sjahril said, Bank Indonesia had asked the owners and management of the bank to increase capital and subordinate loans, raise funds from the money market, halt credits and prevent fund withdrawals by affiliated parties.

However, those measures failed to save the bank from a liquidity mismatch, which prompted the central bank to lend a helping hand.

Bank Indonesia then placed BCA under IBRA's management with decree No. 31/Kep/Dir dated May 28.

Maulana Ibrahim of IBRA said the agency would soon take the necessary steps to restructure BCA by conducting due diligence and placing a supervisory team to monitor the operation of the bank.

IBRA has appointed state-owned Bank Rakyat Indonesia and Bank Negara Indonesia as twinning banks, Maulana said.

IBRA also takes over the powers and authority of the existing directors and commissioners and forms a proxy directors' team headed by D.E. Setyoso of BRI until the bank's shareholders meeting is conducted to choose new directors and commissioners.

"During the restructuring process, BCA will operate as normal. All customers and the public can still enjoy BCA's products and services," Maulana said.

Minister of Finance Bambang Subianto said there was no need for people to worry about their deposits at banks, including BCA, because they were fully secured by government guarantees.

"It also needs to be reiterated here that the main task of IBRA is to nurse banks back to health. So, banks under IBRA, including BCA, will not die. Instead, they will be made healthy again," Bambang said.

"Therefore, I call on the people to remain calm because if the people continue to withdraw their money from banks, it would complicate our efforts to restructure our banking sector."

Sjahril Sabirin also called on people to remain calm and restrain from withdrawing funds excessively so that all banks could continue providing services to their customers.

"Bank Indonesia would like to reiterate that all deposits, including those in BCA, are fully guaranteed by the government," he said.

Yesterday, depositors were still queuing at BCA branches and automated teller machines (ATMs). Many of the bank's branches and offices were closed in the morning.

BCA, the country's largest privately owned bank, is 70 percent owed by the Salim Group, chaired by Liem Sioe Liong, while former president Soeharto's eldest daughter, Siti Hardijanti Rukmana, and eldest son, Sigit Hardjojudanto, hold the remaining 30 percent stake.

A backlash against businesses owned by family and friends of Soeharto has led many Indonesians to believe BCA will be shut. That, in turn, has prompted runs on Bank Central Asia branches and automated teller machines since Soeharto's resignation last week.

BCA said 122 of its offices were damaged, including 17 which were set on fire. Dozens of ATMs were also attacked.

Sjahril said the rioting in Jakarta and other cities on May 13 and 14 had destroyed some 500 bank branches and many more ATMs. (rid)