Tue, 15 Feb 2000

BNI reshuffles its management

JAKARTA (JP): Publicly listed state Bank Negara Indonesia (BNI) reshuffled its management on Monday, appointing a new president and chief commissioner, paving the way for its costly recapitalization.

The bank's shareholders ousted Widigdo Sukarman as BNI president at an extraordinary shareholders meeting, replacing him with the bank's planning director Saifuddien Hasan.

The shareholders also removed four other directors as well as two commissioners, including chief commissioner Arie Soelendro. The bank appointed Zaki Baridwan, an assistant to the rector of Gadjah Mada University, as chief commissioner.

Replacing BNI's management is a condition for its recapitalization in the government's agreement with the International Monetary Fund (IMF).

Newly appointed BNI president Saifuddien said the recapitalization cost of BNI was expected to rise to about Rp 60 trillion (US$8.3 billion) from the original projection of Rp 52.8 trillion.

"I hope the recapitalization of BNI can be conducted soon because the later the recapitalization is materialized, the larger the recapitalization cost will be," Saifuddien said.

Under its agreement with the IMF, the government will release the first tranche of its recapitalization bonds by March 31.

The bonds, however, will be released only after the new management signs performance contracts with the government, expected by Feb. 29, after which Germany's Commerzbank AG will be brought in as an adviser to help implement the bank's business plan.

Commerzbank AG will work with BNI to improve governance, risk management and assess nonperforming loans.

Wolfgang Rohde from the German bank has joined the Indonesian bank's board of commissioners.

The issuance of the remaining tranche of recapitalization bonds will follow the completion of the 1999 year-end financial audit, and implementation of the bank's business plan, expected by June 30.

The recapitalization of BNI, as well as other state banks, has been delayed by the emergence of the high-profile Bank Bali scandal and more recently the Texmaco case.

BNI has especially been faulted for extending a huge Rp 9.6 trillion in loans to one business group, textile conglomerate Texmaco Group.

Following the emergence of the Texmaco case, the government -- as the bank's majority shareholder -- called Monday's extraordinary shareholders meeting to unseat Widigdo and his management team.

In addition to Saifuddien, BNI's shareholders also retained Binsar Pangaribuan on the bank's board of directors. Other directors are all new faces, but all from within the bank. They are Mohammad Arsjad, former head of the bank's strategic planning division; Eko Budiwiyono, former head of the treasury division; Agoest Subhektie, head of the internal supervision division; Rachmat Wiriaatmadja, former head of the international division; and Suryo Sutanto, former head of the technology information division.

Market watchers said it was unclear as to whether appointing a new president and other directors from within the bank would meet the requirements of strengthening the management, as required by the IMF.

Equity banking analyst Lin Che Wei from Socgen-Crosby Indonesia said that ideally, the shareholders appoint an outsider to lead BNI so that he or she would not face any psychological barrier to root out corrupt practices within the bank, especially following the emergence of the Texmaco case.

Nevertheless, he said, the reshuffle would at least give impetus to the increasing transparency at the bank. He expects the market will be neutral to the management change.

"Pak Saifuddien must prove to the market that he is a reformer and is willing to take drastic moves to clean up the bank," he said.

BNI's stock price closed unchanged on Monday at Rp 300 a share. (03/rid)