BPI placed under BI's special care

BPI placed under BI's special care

Urip Hudiono, The Jakarta Post, Jakarta

The central bank has placed Bank Persyarikatan Indonesia (BPI)
under its special surveillance program -- a measure designed by
Bank Indonesia to help prevent a bank's financial woes from
worsening.

Anton Torihorang, BI's bank monitoring director, said on
Monday that the bank's financial condition was deteriorating
badly, leaving the central bank with little choice but to step in
and adopt rescue measures.

"Yes, BPI has been put under our Special Surveillance Unit
(SSU)," Anton said.

Anton however refused to say when the central bank started
running the program on BPI, which is mainly owned by foundations
associated with Muhammadiyah, the country's second largest Muslim
organization.

Under the program, the central bank would suggest a number of
alternate solutions and actions to improve the bank's
performance, notably its financial condition, including drawing
up plans to seek new investors.

The program also allows Bank Indonesia to ask the bank's
shareholders to dismiss and replace its board of directors and
commissioners.

According to BPI's quarterly financial reports submitted to
the central bank, the bank suffered a loss of Rp 78.4 billion as
of September, as compared to about Rp 10.1 billion posted in the
same period last year.

BPI's capital adequacy ratio (CAR), a comparison between a
bank's capital and its assets including high-risk loans, stood at
8.81 percent as of September, slightly above Bank Indonesia's
minimum requirement of 8 percent.

On loans however, the reports showed that BPI's non-performing
loans (NPLs) reached a staggering 23.29 percent, or way above the
maximum permitted 5 percent as set down by Bank Indonesia.

A high percentage of NPLs has the potential to drag a bank's
CAR down, as the bank will have to set aside funds to cover
losses.

Miranda S. Goeltom, BI deputy senior governor, explained that
the central bank has suggested some alternatives to the bank's
management on how it could raise its capital, including finding
new investors.

The SSU program lasts for six months, but can be extended for
another three months pending progress in its financial status.

The central bank has the right to close down BPI should rescue
efforts fail.