BUN, Bank Tiara need huge cash inputs to meet CAR

BUN, Bank Tiara need huge cash inputs to meet CAR

JAKARTA (JP): Cash-strapped Bank Umum Nasional (BUN) and Bank
Tiara need Rp 10.46 trillion (US$747 million) and Rp 2.88
trillion respectively in fresh funds to meet the minimum capital
adequacy ratio (CAR) of 4 percent this year, according to the
Indonesian Bank Restructuring Agency (IBRA).

Farid Harjanto, an IBRA executive, told the media after BUN's
extraordinary shareholders meeting yesterday that the agency was
currently working on the best possible options to achieve the
capital requirement target.

"We could capitalize the bank (BUN) and operate as it is. We
could arrange a merger or acquisition, or transfer the problem
assets to the Asset Management Unit," he read from a statement.

"If all of these options prove unrealistic we would have to
consider closing the bank."

AMU, which will start operations next month, is IBRA's debt
recovery agency of troubled assets.

IBRA vice chairman Pontas Siahaan read out the same statement
after a Bank Tiara extraordinary shareholders meeting which was
also held yesterday.

Last week the government lowered the CAR requirement that must
be met this year to 4 percent from the previous 8 percent amid
reports of worsening financial performances of the country's
banks.

Under the revised capital regulation, banks are required to
increase their CAR to 8 percent by the end of 1999 and 10 percent
by the end 2000.

But many banks will still face difficulties meeting this
year's CAR target due to the worsening of their capital
structure.

Farid said that BUN had submitted inaccurate reports on its
asset value to IBRA of April 3.

He said that BUN reported that its asset position was Rp 15.56
trillion as of April 3 this year while it was only around Rp
11.24 trillion after taking into account loans and adjustments.

"The adjustment has resulted in a negative net worth Rp 10.18
trillion and a reduction in the size of its total assets from
15.56 trillion to just Rp 11.24 trillion," he said.

Farid said that BUN, one of six banks put under the
supervision of IBRA early April, had received Rp 6.6 trillion in
liquidity support from the central bank, Bank Indonesia, between
October and April 3.

To meet the CAR of four percent this year, BUN needs at least
Rp 10.46 trillion, he said.

Farid also said yesterday that two majority shareholders, the
country's timber mogul Mohammad "Bob" Hasan, a golfing friend of
former president Soeharto, and the Ongko group, had received
significant loans from the bank.

"BUN has a well-spread loan portfolio but significant loans
were made to two main shareholders," he said.

Farid said yesterday that the bank's fate would be decided at
a shareholders meeting next month.

The government, in its latest deal with the International
Monetary Fund, said Thursday it would take action in July to
either freeze, merge, recapitalize or liquidate the six private
banks under IBRA's control for which audits have already been
completed. This includes BUN and Bank Tiara.

Bank Tiara

Pontas said that Bank Tiara had also not yet found a solution
to meet the CAR target.

"We have not found the best possible option to reach the
capital target yet," he said.

Pontas also said yesterday that the management of Bank Tiara
had provided IBRA with an inaccurate report of the valuation of
its assets.

He said the bank's management reported total assets of Rp 4.3
trillion as of April this year, much higher than Rp 2.07 trillion
found by independent internationally accredited accountants hired
by IBRA.

"The restated figures show substantial loan loss provisions
and adjustments," Pontas said.

"(The adjustment) has resulted in the creation of a negative
net worth of more than Rp 2.7 trillion and a reduction in the
size of the total assets of the bank from Rp 4.3 trillion to Rp
2.07 trillion," he said.

BUN and Bank Tiara was among six commercial banks placed under
IBRA's control in early April due to their poor liquidity
performance. The bank has received from Bank Indonesia, the
central bank, liquidity support worth Rp 2.44 trillion, more than
500 percent of its total equity.

Pontas said that debt-ridden Bank Tiara was in a devastating
condition now and it would need special attention to improve.

"The condition of the bank is very serious ... the condition
of the lending and treasury activities remains a cause for
concern," he said.

"If all of these options prove unrealistic, we would have to
consider resolving the situation by closing the bank and of
course honoring the deposits of customers as already stated under
the government's guarantee," Pontas said.

Former vice chief commissioner of Bank Tiara Hendrik Kolonas
who was present at the meeting yesterday said that he could not
decide the fate of Bank Tiara anymore as it was in the hands of
IBRA.

"I don't know what will happen to Bank Tiara," he said adding
that it was now hoping to merge with two local banks and seek
foreign partnership.

"But who is going to invest in our paralyzed banking system
now," he asked. (aly)