Fate of six troubled banks may be decided tomorrow

JAKARTA (JP): The government may announce on Friday its decision on the fate of six troubled banks taken over by the Indonesian Bank Restructuring Agency (IBRA), Bank Indonesia Governor Sjahril Sabirin said yesterday.

He said, however, that all options would be explored first, including mergers and recapitalization by bank owners or new investors before deciding to close down the troubled banks.

"All alternatives are still open," he announced following a meeting with Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita.

When asked whether the government had agreed with the IMF to take concrete action on Friday afternoon he replied: "Let's hope so."

The six troubled banks are Bank Danamon, Bank Umum Nasional, Bank PDFCI, Bank Tiara, Bank Modern and Bank BDNI.

International accounting firms have audited the banks and revealed that four of them had fewer assets than reported by their managements, causing doubts that the assets would be enough to cover their liabilities, including repaying massive liquidity support received from Bank Indonesia, the central bank.

The government recently declared four of the six publicly listed banks insolvent. The banks were taken over by IBRA after receiving liquidity support from the central bank in excess of 500 percent of their capital.

IBRA currently supervises 55 domestic banks which also received massive liquidity support from the central bank to help them meet demands from depositors withdrawing their savings.

The support was part of the government's guarantee scheme to prevent a collapse in the banking system amid very low confidence in the sector. (rei)