Five commercial banks under BI surveillance
JAKARTA (JP): Five commercial banks including one publicly listed bank are currently under the special surveillance of the central bank, according to Bank Indonesia deputy director for banking supervision Sabar Anton Tarihoran.
Sabar said Friday that the banks had escaped the latest round of banking closures because the owners had injected fresh money to lift the banks' capital adequacy ratio (CAR) to beyond the minimum 4 percent requirement.
"But the banks remain under the special surveillance status because we still need to intensively monitor their performance until they improve," he told a press conference.
"And there are already signs of improvement," he added.
Sabar declined to name the banks.
He explained that although the owners had recapitalized the banks, it would be futile if they continued to perform poorly as the financial losses would eat into the capital.
He said that according to the existing ruling, the central bank would close a bank if its CAR level dropped to below the 4 percent level or if its non-performing loan (NPL) was more than 35 percent.
"But we're putting greater stress on CAR because it reflects the owners responsibility," he said.
The five banks were transferred into the special surveillance unit of the central bank along with Bank Ratu and Bank Prasidha on June 12. Bank Indonesia closed down the latter two banks last week because their owners failed to inject fresh money to improve the banks' CAR condition.
The banks are part of the 75 "A-category" banks which did not join the government bank recapitalization program launched last year because their capital was adequate.
Separately, Bank Ratu lawyer Hotman Paris Hutapea said Friday that the bank was planning to file a legal suit against Bank Indonesia following the closure of the bank.
Hotman said that the central bank had sent two contradictory letters to his client.
He pointed out that on Oct. 17, the central bank sent a letter giving Bank Ratu two weeks to inject Rp 10 billion and to hold a shareholders meeting to approve new investments.
But he said that the central bank sent a closure order to Bank Ratu on Oct. 20, before the initial deadline expired.
Meanwhile, Sabar said that Bank Indonesia had given Bank Ratu's owner enough time to inject the necessary capital.
Sabar pointed out that even prior to June 12, the central bank had already reminded the bank's owner of the bank's CAR condition.
He said that the bank was first given until September 12 to come up with fresh money, but that this was extended again and on October 12 the owner finally came to the central bank with a new investor called GKBI (an association of cooperatives in the traditional batik textile industry), which promised to inject Rp 10 billion.
Sabar said that the new investor was given a week to deposit its money in an escrow account, but as of October 19 GKBI had failed to meet the deadline.
A total of 68 commercial banks have been closed down since the country's financial and economic crisis started in the middle of 1997.
The central bank closes down banks with CAR below the 4 percent level if their contribution to the national economy or regional economy is not significant or their number of depositors is less than 150,000.
The government guarantees depositors money from a bank that has been closed down. So if a bank with a huge number of depositors is closed down, the government would spend more than they would through recapitalizing the bank or merging it with a healthier bank. (rei)