BI closes down Bank Prasida and Bank Ratu

JAKARTA (JP): Bank Indonesia closed down Bank Prasidha Utama and Bank Ratu on Friday, the Indonesian Bank Restructuring Agency (IBRA) said in a statement.

IBRA said that it would immediately send its officers to secure all of the assets of the two banks.

IBRA also said that all depositors money was guaranteed by the government.

The agency did not give any reasons for the closures, but Bank Indonesia had said earlier this month that it was examining the financial condition of some 75 commercial banks in order to decide on their fate.

The central bank said that if the banks's capital adequacy ratio (CAR) was below the minimum 4 percent requirement and if their non-performing loans (NPL) level was more than 35 percent, the banks could risk closure.

Bank Prasidha and Bank Ratu are two of the 75 banks which did not join the government's bank recapitalization program launched in 1998 because their CAR levels were still above the minimum requirement. This group of banks was referred to as the category- A banks.

CAR is the ratio between capital and risk-weighted assets.

Many banking analysts have cautioned that the condition of category-A banks has continued to deteriorate due to the slow progress being made in the debt restructuring program and the still unfavorable banking environment.

Bank Prasidha is an affiliate of publicly listed PT Prasidha Aneka Niaga, which produces various commodities including coffee, rubber crumbs, tapioca, and chocolate.

Bank Ratu is an affiliate of publicly listed PT Mustika Ratu, a producer of traditional herbal products and cosmetics.

IBRA said that the government would repay depositors starting on Thursday via the banks' branches.

The agency also said that the bank's debtors could settle their full obligations to IBRA via Bank Central Asia.

Meanwhile, Bank Prasidha lawyer Amir Syamsuddin protested the central bank's decision to freeze the bank saying that it ran contrary to prevailing law.

Amir pointed out that the State Administrative Court had ruled on October 11 that Bank Indonesia delay its decision to place the bank under "special surveillance".

Amir also said that Bank Prasidha was closed down because of a deficiency in its CAR. But he said that the bank's CAR declined to below the 4 percent level because IBRA had delayed the payment of part of the interest on funds deposited in the now defunct Bank Uppindo.

Bank Ratu's management said that the Indonesian Batik Cooperatives Union (GKBI) had agreed to acquire the bank and inject fresh funds to raise its CAR level.

But GKBI failed to submit the funds by its deadline on Oct. 12, although a buy-out agreement had already been reached.

The closure of the two banks raised the number of the banks closed by the government since the financial crisis hit the country in late 1997 to 80.(rei)