Thu, 04 Mar 1999

Government divided over plans to expose bad bankers

JAKARTA (JP): The government is still undecided whether to go ahead with plans to expose the central bank's list of bad bankers on March 13, according to Bank Indonesia (BI) Governor Sjahril Sabirin.

He said on Wednesday that disclosing the "black list" of bad bankers to the public had its benefits and disadvantages.

"We also have to look at the legal aspects so that we won't be sued," he told the press on the sidelines of a debate session with the House of Representatives on the central bank bill, which had to be postponed as Finance Minister Bambang Subianto failed to show up.

Bambang vowed to the House on Monday he would reveal the names of bad bankers sometime in the middle of this month in a bid to regain credibility for the government's costly bank restructuring program.

He said that the announcement of the bank recapitalization program, which was delayed last week for at least two weeks, would include such details as the names of blacklisted bankers, banks that had gone into trouble due to unsound practices, bankers' debts, legal lending limit violations, and other breaches of prudential regulations.

Sjahril said that bankers who had caused their banks to go bust through unsound banking practices would be entered into Bank Indonesia's black list.

"They can be the bank's management or owners," he added.

However, he said that disclosing the list to the public had its merits and disadvantages.

"Announcing the list will help advise the public and businesses on which men to avoid," he said.

"But it will also be a disgrace to the (blacklisted) bankers," he added.

The country's financial authority has received strong criticisms over its handling of the bank restructuring program, which will require total financing of Rp 300 trillion (US$35 billion) from the government.

The Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita announced last week that the bank closures scheduled for Feb. 27 had been delayed by at least two weeks to give the authority enough time to review the business plans proposed by some banks which needed to be recapitalized.

Speculation has circulated that the delay was caused by government concerns that the closure of so many banks, with the resultant large number of layoffs, would be politically risky in the run-up to the June general election.

Another rumor said that bank owners had been lobbying senior government officials to prevent their banks from being liquidated.

The government earlier said that a total of 40 banks would risk being closed if they failed to be recapitalized.

Banks with a capital adequacy ratio (CAR) of between minus 25 percent and less than 4 percent would be recapitalized by the government if the owners could provide at least 20 percent of the recapitalization funds, and the owners and management passed BI's "fit and proper test" and submitted a viable business plan.

At the end of January, 38 banks had CAR levels below the cutoff limit for recapitalization, and 66 banks had met the necessary CAR requirement.

Sjahril said on Wednesday that since Friday some banks had managed to inject fresh capital to lift their CAR to the level qualifying them to join the recapitalization program, and some others boosted their CAR levels over the 4 percent requirement.

"The funding came from foreign investors," he said, but declined to give further details.

The government has said that the delay in the bank liquidation announcement was also to give some banks more time, until March 9, to inject more fresh money to avoid closure.(rei)