Government plans another Rp 105.65t in bonds to recapitalize banks
Government plans another Rp 105.65t in bonds to recapitalize banks
JAKARTA (JP): The government plans to issue another Rp 105.65
trillion in bonds to complete the country's bank recapitalization
program, according to a senior official at the Ministry of
Finance.
Director general of financial institutions Darmin Nasution
said on Tuesday that the bonds would be injected into three state
and two private banks.
He said the new bonds would raise the total bonds issued by
the government to Rp 655.37 trillion (about US$77 billion) if the
bonds issued to finance Bank Indonesia's liquidity support for
ailing banks and credit programs were taken into account.
"The Rp 105.65 trillion worth of bonds will be used to
recapitalize five banks," Darmin told the House of
Representatives Commission IX for the state budget and finance
during a hearing.
The government aims to complete its bank recapitalization
program this month in a bid to boost the capital adequacy ratio
(CAR) to beyond the minimum 4 percent level.
Darmin said that Rp 31.80 trillion of the bonds would be used
to finance the second and final recapitalization program of
publicly listed state Bank Negara Indonesia (BNI).
The government injected Rp 30 trillion worth of bonds into BNI
in April.
Darmin said that Rp 29.17 trillion of the bonds would be
injected into state Bank Rakyat Indonesia (BRI).
The government initially planned to have completed the
recapitalization program of BRI by the end of last month, but it
was delayed due to a continuing dispute between President
Abdurrahman Wahid and Bank Indonesia Governor Sjahril Sabirin.
Under an agreement with the International Monetary Fund, the
management of BRI had to be reshuffled prior to its
recapitalization program.
The President was reported to have proposed Prijadi
Praptosuhardjo as the new president of BRI, but he failed,
however, to pass Bank Indonesia's fit and proper test.
Bank Indonesia insists that anyone who fails the fit and
proper test cannot not lead a bank.
It's not clear whether the delay in BRI's recapitalization
program will increase the cost.
Darmin said that Rp 11.2 trillion worth of bonds would be
injected into another state bank, Bank Tabungan Negara (BTN).
He said some Rp 4.61 trillion of bonds would be injected into
publicly listed Bank Bali.
The government has vowed to recapitalize Bank Bali by the end
of this month.
The recapitalization program of Bank Bali has also been
delayed from its earlier target of last month due to a legal
battle between the former owner and CEO of Bank Bali Rudy Ramli
on one side, and Bank Indonesia and the Indonesian Bank
Restructuring Agency (IBRA) on the other.
It's unclear whether the government will go ahead with the
recapitalization program if Rudy declines to drop his legal suit.
Rudy filed a suit after BI and IBRA decided last year to
nationalized his bank.
Darmin said that the remaining Rp 28.87 trillion of the bonds
would be used to finance the second recapitalization program of
Bank Danamon.
Bank Danamon has to be recapitalized again because it will be
merged with eight other smaller banks which still have negative
CAR levels.
Darmin also said that, to date, the government had issued some
Rp 321.43 trillion worth of bonds to recapitalize several banks
and another Rp 218 billion worth of bonds to finance Bank
Indonesia's massive liquidity support to help ailing banks
survive the financial crisis between 1998 and 1999. (rei)