BI drafts ruling on on bank liquidation

JAKARTA (JP): Bank Indonesia (BI), the central bank, is drafting a new government ruling on bank liquidation to provide better protection for depositors.

The central bank's governor, J. Soedradjad Djiwandono, told journalists following a coordination meeting of economics ministers here yesterday that the existing rules on liquidation of limited liability companies are very general in nature, and banks need a special ruling on liquidation because they differ from other companies.

"Banks' problems are not always the same with limited liability companies in general. That's why banks need a more specific ruling (on liquidation)," Soedradjad said.

Currently, the liquidation of companies -- including banks -- is based on the 1995 Limited Liability Law, which stipulates that a company can be dissolved in three ways: by the company's shareholders resolution, the expiration of any stated duration and a court decision.

The court may appoint a liquidator and order the liquidation of a company at the request of the attorney general if the company has violated the interests of the public, of the holders of at least one-tenth of the company's total shares or of the creditors.

The law also provides legal certainty for creditors and shareholders as to the manner and procedure of the liquidation of the company.

Soedradjad, however, refused to elaborate on the drafted ruling, saying that it is still being formulated and consulted with related ministries. He added that he is also seeking inputs from related parties for the ruling.

He confirmed that the planned ruling will give more protection to the rights of depositors, who are currently in a weak position when a bank in which they deposited their money is dissolved.

Banking analysts often cited the cases of Bank Summa and Bank Umum Majapahit -- whose liquidations have not been completed -- as examples of the ruling's complexity.

Bank Summa, which was owned by the Soeryadjaya family, was closed down in 1992 because of dubious bad loans of around $500 million. However, its liquidation process, which involves the central bank, is still going on.

Soedradjad said yesterday that the planned ruling is expected to expedite bank liquidation processes so that people's confidence over the country's banking industry will improve.

He said that the planned ruling is to complement the central bank's efforts in solving the dilemma of problem-ridden banks.

In facing problem-hit banks, Bank Indonesia seems to avoid dissolving them, even though they are in a serious condition. Instead, it often advises them to conduct a management reshuffle to help salvage them from bankruptcy.

A number of analysts, including Marjanto Danusaputro, Christianto Wibisono and Kwik Kian Gie, have expressed their support for the central bank's efforts to draft a bank liquidation ruling.

They contended that such a ruling is in conformation with the Banking Law of 1992, which stipulates that banks facing liquidity and solvability problems or suffering losses of over 75 percent of their capital must be liquidated. (rid)