Thu, 23 Nov 2000

BI operates normally despite resignation: Official

JAKARTA (JP): Bank Indonesia (BI) is operating normally despite the recent resignation of key members of its board of governors, central bank spokesman Halim Alamsyah said on Wednesday.

Halim said the top management reshuffle would not disrupt the operation of Bank Indonesia because the central bank had standard operating procedures.

He also said the members of the board of governors who tendered their resignation would still be in office until successors were appointed.

"We continue to monitor the rupiah, and we continue to do our daily job according to standard operating procedures," Halim told a news conference.

Sjamsul Arifin of Bank Indonesia's research and monetary policy division said in the monetary field, the central bank continued to hold the weekly auction of its SBI promissory notes.

The auction resulted in an increase in the Bank Indonesia benchmark interest rate to 14.02 percent from 13.98 percent at the previous week's auction.

Sjamsul also said the central bank was capable of taking necessary measures to help stabilize the rupiah.

Joko Sarwono of the central bank's supervision division said the management reshuffling process at the central bank had not affected the operation of commercial banks.

"Everything is running normally, the banks are safe," Joko said.

The resignation of senior deputy governor Anwar Nasution and four other deputy governors last week created jitters in the financial market as it was feared it would cause a leadership vacuum in Bank Indonesia, which would make the central bank unable to create a clear policy.

The rupiah ended relatively flat late on Wednesday at Rp 9,450 to the U.S. dollar compared to Rp 9,455 on Tuesday.

The government has nominated Anwar Nasution and two other BI executives as the new governor of the central bank. But there are signs now that the appointment may take longer than initially anticipated amid interference by politicians.

The House of Representatives agreed to the government proposal to amend the Central Bank Law, approved by the legislature in May 1999, to abolish the legal obstacle in the plans to replace Bank Indonesia Governor Sjahril Sabirin.

Sjahril is now under house arrest for his alleged involvement in last year's Bank Bali scandal.

The government has called for the reshuffling of the top management of the troubled central bank, but it could not be implemented because the Central Bank Law stipulates that the members of the board of governors can not be replaced unless they are proven to have committed a crime, they are incapacitated or voluntarily step down.

But the amendment process may be delayed because the House has decided it must go through the normal debating process, while the legislature will take a recess from next month until early next year.

Elsewhere, Joko said the performance of the country's banking sector was expected to be able to meet the minimum 8 percent capital adequacy ratio (CAR) requirement by the end of 2001.

He said the central bank had made a simulation based on the latest data, and concluded that only a few banks would fail to meet the new CAR requirement.

Bank Indonesia senior official for banking supervision Siti Fadjriah said only about 10 banks would be unable to meet the requirement.

She said it would be better if the banks merged with stronger banks, but she stressed that the central bank would not force a merger process.

"We suggest that the weaker banks seek a partner. But we won't push them into it. They have to do it on their own initiative," she said.

Joko said Bank Indonesia had set up an exit policy for banks that would likely fail to meet the CAR requirement, by transferring them to the special surveillance unit of Bank Indonesia for six months.

He said if the banks failed to improve their condition, Bank Indonesia would close the banks.

Joko also said the central bank, the government and the legislature had agreed that there would no longer be another recapitalization program.

He said if the government launched the second recapitalization program it would only harm the confidence levels in the country's banking sector.

The government completed the costly bank recapitalization program earlier this month, allowing banks to have a minimum CAR level of 4 percent.

But a minimum CAR level must reach 8 percent by the end of next year to meet international standards.

The level of non-performing loans (NPLs) must also drop below 5 percent by the end of 2001.

Joko said as of September, the level of NPLs had dropped to 17.9 percent compared to 32 percent in June. (rei)