BI adamant Salim won't return to helm at BCA

Berni K. Moestafa, The Jakarta Post, Jakarta

Bank Indonesia has threatened to nullify the Salim Group's ownership of PT Bank Central Asia should the group regain control of the bank through the purchase of BCA's 51 percent stake from the government.

Bank Indonesia Governor Sjahril Sabirin said that, if Salim turned out to be the buyer of the BCA shares, the central bank would annul the group's ownership of the bank.

"As far as Bank Indonesia is concerned, we will not give them (Salim) our permission," he told reporters on Friday.

The government, via the Indonesian Bank Restructuring Agency (IBRA), is offering a 51 percent stake in BCA for sale.

Eight bidders have lined up to purchase the shares. But there is suspicion that some of them are acting as nominees for Salim to regain control of BCA.

Bank Indonesia is conducting a fit and proper test on the bidders to, among other things, filter out Salim's money.

Salim has been banned from buying back BCA, stemming from charges of having managed the bank recklessly.

Under Salim, BCA extended many of its loans to affiliated firms -- more than a few of which, in turn, went bust during the 1997-1998 financial crisis.

To save the country's once-largest private bank from collapse, IBRA recapitalized BCA with government bonds. Interest rates on these bonds are paid for by the state budget.

Now Salim owes the government some Rp 52 trillion (about US$4.97 billion) that it must repay by surrendering its ownership of various companies, including BCA.

Under the so-called Master of Settlement and Acquisition Agreement (MSAA), Salim cannot buy back BCA unless it first settles its outstanding debts. The MSAA regulates the transfer of Salim's assets to IBRA.

But even if the group makes good on its debts, it must still get Bank Indonesia allow the group reenter BCA.

Speaking on the subject, Sjahril said that, if Salim secures government approval, Bank Indonesia could drop the group from its blacklist.

"If the government says it will honor the MSAA, than we will do the same," he said.

That, however, would contradict Bank Indonesia's own fit and proper test, which bans Salim from reentering BCA.

According to Sjahril, the government's MSAA deal may overrule criteria set forth under the fit and proper test.