BI drafts ruling on on bank liquidation

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)