Wed, 14 Jun 2000

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)