Closed bank owners face legal action

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) must take legal action against the owners of four closed down banks within the week, according to the secretary of the Financial Sector Policy Committee (FSPC), Saefuddin Tumenggung.

Saefuddin said on Thursday that the FSPC had classified the former owners of the now defunct Bank Aspac, Bank Dewa Rutji, Bank Orient and Bank Central Dagang as uncooperative in settling their obligations to the government.

"The FSPC has told IBRA to take legal action against the owners of the four closed banks because they've been uncooperative," he told a news conference following a meeting of the FSPC.

The FSPC is led by Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie and its members include several senior economics ministers.

"IBRA has been given a week (to take the legal measure). The agency will then hand the case over to the Attorney General's Office," Saefuddin added.

The four banks were part of the 39 banks closed down by the government last year due to various reasons, including violations of banking rulings and the inability of their owners to provide the finance required to recapitalize the banks.

But prior to their liquidation, the government injected massive liquidity support between 1998 and 1999 to support the banks when confidence in the industry plunged.

The owners of the banks which violated banking rulings, particularly the legal lending limit, must repay the liquidity support they received.

The four closed banks owe the government a combined total of Rp 4.67 trillion (US$536.78 million)

IBRA said earlier this week that the owners of 25 of the 39 banks had agreed to settle their obligations by surrendering their assets. The banks owe the government a total of Rp 10.5 trillion.

The agency also said that owners of three banks had agreed to repay their obligations in cash.

But IBRA added that the shareholders of the remaining seven banks had no obligations under the agency's shareholders settlement program, because the banks had not violated the legal lending limit ruling.

In the past, most of the country's banks channeled the bulk of their money to affiliated business groups.

Bank Bali

Saefuddin also said that the FSPC had told IBRA to come up with a recommendation by the middle of this month on whether to recapitalize or liquidate publicly listed Bank Bali.

"IBRA will submit its assessment on whether to recapitalize or liquidate Bank Bali to FSPC in the middle of July," Saefuddin said.

He also reaffirmed that the government would not recapitalize the bank if its legal dispute with Bank Bali former owner and CEO Rudy Ramli had not been settled.

The government initially planned to complete the recapitalization of Bank Bali by the end of last month, but it was canceled due to the legal dispute. The recapitalization cost was estimated at Rp 4.99 trillion.

Rudy has filed a legal suit against IBRA and Bank Indonesia for their decision to nationalize his bank in 1999. The Jakarta Administrative Court ruled that the Bank Bali takeover by the government was illegal. Both IBRA and Bank Indonesia have appealed, and the case is currently being processed.

Sources said that the government and Bank Indonesia were negotiating over an immediate out of court settlement to allow the recapitalization of Bank Bali to proceed.

The government has said that the recapitalization cost of Bank Bali would inflate by about Rp 40 billion for each month of delay.

The government now expects to be able to recapitalize Bank Bali in September, if the legal dispute can be resolved this month.

Under the country's bank recapitalization program, the government will inject bonds into recapitalized banks.

Minister of Finance Bambang Sudibyo said recently that a liquidation measure would cost the government some Rp 6 trillion in cash, not bonds, including a guarantee of depositors' money in the banks.

Separately, IBRA deputy chairman Irwan Siregar said at the same news conference that the FSPC had approved the debt restructuring proposal of PT Bali Nirwana Resort, a unit of the Bakrie Group, which is one of the agency's top 21 debtors.

Irwan said that Bali Nirwana owed the agency some $166.3 million.

He said that the debt restructuring was divided into four tranches, through a combination of debt rescheduling and debt to equity swaps. (rei)