BI operates normally despite resignation: Official

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)