BCA rating changed to 'not meaningful'

BCA rating changed to 'not meaningful'

MELBOURNE (Dow Jones): Standard & Poor's credit rating agency changed yesterday its counterparty rating on Bank Central Asia or BCA, to "not meaningful" from triple-Cpi in response to the bank coming under the supervision of the Indonesian Banking Restructuring Agency.

An NM, or not meaningful rating refers to situations where considerable uncertainty exists as to the future financial profile of the financial institution, S&P said.

The IBRA's action follows several days of deposit runs at BCA, which necessitated the extension of government-liquidity credits to the bank.

"The runs apparently stemmed from a loss of depositor confidence following the resignation of president Soeharto, whose family members hold a minority shareholding in BCA," S&P said.

"This situation underlines the significant deterioration in depositor confidence and the heightened risk in Indonesian banking," S&P noted.

BCA's equity is estimated to range between US$200 million - being shareholders' funds at Dec. 31, 1997 - and US$300 million, if media reports that the bank's majority shareholder has recently injected US$100 million as equity are correct," S&P said.

The Salim Group is BCA's majority shareholder.

"Following the takeover of BCA, the Indonesian government now either owns, closely supervises, or manages more than 70 percent of the Indonesian banking system. Wholly and majority-owned state banks have more than 40 percent of banking system assets, while the IBRA supervises or has management control over roughly 30 percent of industry assets," S&P noted.

BCA, Indonesia's second-largest bank, had assets of US$5.3 billion equivalent as of Dec. 31, according to S&P.

The IBRA, a government body set up in January to rehabilitate banks, places banks under its oversight if it considers them as possessing weakened financial profiles. It has wide-ranging powers to restructure these banks.

"We consider the placement of a bank under the IBRA's regulatory supervision as a result of the bank's financial condition as tantamount to regulatory intervention. Thus, the counterparty ratings for these banks are changed to NM," S&P said.