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)