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)