BI imposes ceiling on forex deposits and liabilities

BI imposes ceiling on forex deposits and liabilities

JAKARTA (JP): The central bank, Bank Indonesia, introduced
yesterday ceilings on banks' foreign exchange deposits, foreign
exchange nontrade and trade related liabilities, including
letters of credit.

Ceilings on credit growth and interest rates have also been
imposed, the Bank Indonesia (BI) and the Indonesian Bank
Restructuring Agency (IBRA) said in a joint statement yesterday
on initial measures for Indonesian bank restructuring.

The measures were taken to prevent irregularities that might
result from the government's decision last week to guarantee
domestic banks' obligations to depositors and creditors, they
added.

"BI and IBRA demand that bank managers behave responsibly,
keeping in mind the interests of the country," said the statement
sent to The Jakarta Post yesterday.

The two institutions also asked banks to thoroughly review
their assets and contingent liabilities and assess realistically
all the losses they contained.

BI and IBRA warned that any transaction designed to abuse the
guarantee scheme would be equivalent to embezzlement of the
public's money.

In an effort to rebuild faltering confidence in the country's
banking industry, the government last week announced a blanket
guarantee of deposits and debts of all banks incorporated in the
country, including joint venture banks, and set up IBRA in charge
of rehabilitating the banking sector.

Both IBRA and BI had been working closely together to define a
comprehensive restructuring strategy to rectify the condition of
the banking sector.

They added that after introducing the guarantee scheme the
first priority was to improve understanding of the condition of
the banking sector, including the impact of the current difficult
macroeconomic conditions on banks' balance sheets.

"The assessment will be completed shortly," the two
institutions said.

A twofold resolution strategy had also been defined:
rectifying the damage of the past, and preparing for the future,
added the statement, which was signed by BI's managing director
Mukhlis Rasyid and IBRA's chief Bambang Subianto, who is also
director general of financial institutions at the finance
ministry.

They said the process of rectifying the damages to banks'
financial structures would involve two measures.

First, making fully apparent and then allocating the assets
accumulated by the banks. The losses would be distributed first
to the banks' owners and the holders of subordinated debts and
thereafter to IBRA.

Second, preparing for the future. IBRA would review the
prospects of the banks placed under its responsibility, and
decide on the best approach for restructuring each of them, the
institutions said, adding that external help might be used when
appropriate.

"IBRA will foster the merger of clusters of banks presenting
synergies and will also attract new investors, including from
abroad," they said.

Following the sharp fall of the rupiah against the U.S. dollar
and the closing down of 16 banks in November, confidence in the
country's banking sector waned. The public withdrew deposits, and
foreign banks became increasingly reluctant to accept letters of
credit issued by Indonesian banks.

Some 70 banks were reported to have signed the government's
guarantee scheme to lure back depositors.

The banks had to pay a half-year fee of 0.05 percent of total
guaranteed deposits and debts. Loan growth would also be limited
to 2 percent per month, while interest rates for rupiah would be
based on Jakarta interbank offered rate (Jibor) and foreign
exchange deposits on Sibor (Singapore interbank offered rate).
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