BI to keep eye on bank asset moves

JAKARTA (JP): Bank Indonesia, the central bank, will place a number of its officials at private banks earmarked for closure later this month to ensure that the banks' assets are not removed by the owners prior to liquidation, according to one director.

BI director Soebardjo Djojosoemarto said on Wednesday that the officials would start checking the banks' assets on Saturday.

"The investigation team's primary responsibility is to ensure that the banks' assets are not transferred to other places," he announced at a media conference at his office.

He said the measure was important because under the previous bank liquidation process, bank owners managed to transfer some of the banks' assets to other parties prior to closure.

President B.J. Habibie has said that weak banks will be closed down on Feb. 27 as they are considered beyond rescue.

Bank Indonesia Governor Sjahril Sabirin indicated on Tuesday that some 40 private banks may be liquidated.

The government has not yet decided on the exact number of banks to be closed down because the central bank is still assessing the fate of several other banks.

But Soebardjo stressed that the public should not panic as all deposits were guaranteed by the government.

He said BI's investigation team would also make sure that the banks did not offer interest rates that exceeded the level guaranteed by the government.

"The guarantee program will not cover deposits offered at interest rates above the government ceiling rate," he said.

"We have asked banks not to offer interest rates exceeding the ceiling ... it is not good banking practice."

He said that depositors of liquidated banks could start withdrawing their money through transferring banks, yet to be appointed by the government, starting March 2 until early June.

"So there's no reason to be in a hurry as there will be enough time," he said.

Soebardjo said that transferring banks would be announced by the government on Feb. 27, following a week of selection process to start on Feb. 20.

He explained that transferring banks would be selected based on consideration that depositors would not have to go far to withdraw their money.

He said the funds for the guarantee scheme would be lent by Bank Indonesia to the government in the form of BI liquidity support, which would be repaid through the sale of assets of the liquidated banks.

Soebardjo said the directors of the banks to be liquidated would be summoned by Bank Indonesia on Feb. 26 to officially inform them of the liquidation decision.

He said that on Feb. 27, the banking authority would fully disclose which banks would be closed, which banks needed recapitalization and which banks had enough capital and did not need to be recapitalized.

The government has divided the country's more than 200 commercial banks into three categories based on their capital adequacy ratio (CAR), the ratio between equity capital and risk- weighted assets.

Banks with a CAR level of between minus 25 percent and less than 4 percent need recapitalization, while banks with a CAR of less than minus 25 percent will be liquidated.

Banks joining the government recapitalization program, under which they will receive up to 80 percent of government funding to bring their CAR levels to a minimum of 4 percent, will have to submit business plans on how to bring their CAR levels to a minimum of 8 percent by 2001, settle Bank Indonesia liquidity support and lower their related party lending to the desirable level.

The deadline for submitting business plans fell at midnight, Feb. 15.

Once business plans are approved, bank owners and management teams also have to pass Bank Indonesia's "fit and proper" test.

If the owners and management are considered clean and responsible, the banks will have until April 21 to inject the 20 percent funding requirement.

Banks failing to meet the additional requirements will also be closed down.

Soebardjo said most of the country's 30 foreign joint-venture banks had CAR levels of more than 4 percent.

As for undercapitalized joint-venture banks, Soebardjo said the foreign shareholders would have to inject fresh capital into their banks. (rei)