Central bank promises fair resolution on Bank Bali

Central bank promises fair resolution on Bank Bali

JAKARTA (JP): Acting Bank Indonesia governor Anwar Nasution
said on Friday that the central bank would try to come up with a
"fair" resolution to the Bank Bali case.

Anwar declined to say whether the publicly listed bank would
be recapitalized or liquidated.

"I can't make any comments now. I have yet to discuss it with
my colleagues on the board of governors. But it is important that
(the decision) is based on a principle of fairness and is for the
sake of national interest," he told reporters.

He expected the board of governors to meet on Saturday to
decide on what to do with Bank Bali.

Anwar used to controversially suggest that Bank Bali be
liquidated because of the expensive cost the government has to
bear to keep it afloat.

University of Gadjah Mada economist Sri Adiningsih said on
Friday that Bank Indonesia should liquidate Bank Bali because the
problem was already too complex.

However, she added that the possibility of such a measure was
unlikely because it would cost the government more than Rp 6
trillion (US$638 million) in cash, particularly to pay for the
bank's time deposits guaranteed by the government.

In comparison, Sri said, if the government recapitalizes the
bank, it would only need to inject bonds to finance up to 80
percent of the recapitalization cost.

Sri said that the option for the central bank now was to merge
Bank Bali with other stronger banks.

The Financial Sector Policy Committee (FSPC) surprisingly
decided on Thursday to transfer Bank Bali from the Indonesian
Bank Restructuring Agency (IBRA) back into the hands of Bank
Indonesia.

Coordinating Minister for Economy, Finance and Industry Kwik
Kian Gie, who also heads the FSPC, said that IBRA must honor the
decision of the Jakarta Administrative Court which ruled last
year that the taking over of Bank Bali was unlawful.

Bank Indonesia transferred Bank Bali to IBRA last year after
its former owners, the Ramli family, could not come up with the
necessary financing requirement to help finance the
recapitalization of the bank.

IBRA then subsequently nationalized the bank to allow the
government to recapitalize it.

But the outbreak of the high profile Bank Bali scandal in July
last year had prevented the recapitalization program from
proceeding.

Rudy Ramli, the former owner and CEO of Bank Bali, filed a law
suit against Bank Indonesia and IBRA over the nationalization of
his bank, and surprisingly the Court ruled in favor of Rudy.

Bank Indonesia and IBRA made an appeal. But the FSPC's
decision on Thursday had forced IBRA to drop its appeal.

The legal dispute has further delayed the recapitalization of
Bank Bali. The House of Representatives has demanded that the
government first settle the legal dispute before it proceeds with
the recapitalization program estimated to cost some Rp 4.99
trillion as of the end of June.

The government has said that each month the recapitalization
program is delayed would inflate the cost of recapitalization by
Rp 40 billion.

The transfer of Bank Bali into the hands of Bank Indonesia
could lead to the closure of the bank unless Rudy Ramli and
Deustche Bourse Clearing (DBC) AG as the majority shareholders
can come up with the necessary 20 percent cash requirement to
help finance the recapitalization of the bank.

DBC is now believed to be the majority owner of Bank Bali
after it quietly increased its stake from less than 20 percent
before the financial scandal erupted to around 50 percent at a
time when the scandal still grabbed mass media headlines.

The investors behind DBC and their investment intention in
Bank Bali are still a mystery. Rudy Ramli has denied any
connection to DBC and demanded that the capital market authority
uncover the people behind it. There has also been rumors that
investors in DBC are people linked to the former president B.J.
Habibie or simply German investors wanting to invest in one of
Indonesia's prospective banks.

The Indonesian Capital Market Supervisory Agency or Bapepam
has promised to investigate DBC and to uncover the investors.

Many analysts have said that Rudy doesn't have enough
resources to help finance the bank's recapitalization program.

The participation of foreign investors would also be unlikely
as an earlier attempt by the UK-based Standard Chartered Bank
ended unsuccessfully.

Rudy declined to give comments. He said that he had yet to
study the FSPC decision and wanted to hear first what the central
bank was planning to do. (rei)