Foreign investors express interest in troubled banks

JAKARTA (JP): Several foreign investors have shown a keen interest in buying stakes in the six financially troubled banks under the control of the Indonesian Bank Restructuring Agency (IBRA), Minister of Finance Bambang Subianto said yesterday.

The minister declined to provide further details but said that the state-sponsored IBRA would soon issue a deadline for the bank owners to come up with concrete plans to recapitalize their banks, including the possibility of selling off some assets to foreign investors.

He was speaking at the second day of a hearing on the revised 1998/1999 state budget with House of Representatives Commission VIII for the state budget, finance and research and technology.

The six banks are currently under severe pressure to raise more funds to meet the new minimum 4 percent capital adequacy ratio (CAR) requirement which must be satisfied by the end of this year.

Bambang said Friday that domestic banks which could not meet the CAR requirement would have to be closed down as part of efforts to rebuild confidence in the ailing banking sector.

Although he declined to give any timetable, this indicated that closing down insolvent banks would not have to wait until the end of 1998.

In a June 24 agreement with the International Monetary Fund, the government said it would take action by the middle of this month to freeze, merge, recapitalize, or liquidate the six banks whose audits by international accountancy firms had been completed.

IBRA said last month that four of the six banks would need huge capital injections to meet the minimum 4 percent requirement.

Bank Danamon needs Rp 28.3 trillion (US$ 2 billion) to recapitalize; Bank Umum Nasional needs more than Rp 10 trillion; Bank PDFCI needs Rp 3.2 trillion and Bank Tiara needs Rp 2.89 trillion.

The audit results on Bank Dagang Nasional Indonesia and Bank Modern have yet to be announced.

The banks were taken over by IBRA in April due to their massive liquidity problems. Bank Indonesia has injected liquidity credits of more than 200 percent of their capital to rescue their operations.

Bambang said the international auditors had completed their due diligence on the six banks.

The international auditors are expected to complete their due diligence on all domestic banks by the end of October as part of the restructuring program of the country's banking sector.

Bambang also said yesterday that BI's liquidity injections into domestic banks amounted to Rp 138 trillion, or around 13 percent of GDP.

The liquidity injections were provided as part of the government's guarantee on all bank time deposits to prevent a massive run on the banking system in the wake of plunging confidence in the sector. (rei)