Government to recapitalize 70 banks
JAKARTA (JP): The government will recapitalize 70 out of 166 national commercial banks at a cost of Rp 257.5 trillion (US$34.3 billion) in a bid to revamp the beleaguered banking industry, Minister of Finance Bambang Subianto said on Wednesday.
The banks which will be recapitalized include six state banks, 49 privately-owned banks (including four taken over by the government) and 15 provincial development banks.
As for the eligible private and provincial development banks, Bambang said, the government would provide 80 percent of the total funds needed to recapitalize the banks.
"This recapitalization program aims to quickly mend the banking system, to make it function again so that the economic wheels will roll again and employment opportunities will emerge again," Bambang said after an Economic Resilience Council meeting at the State Guest House.
This recapitalization would increase the banks' capital adequacy ratio (CAR), the ratio between equity capital and risk- weighted assets, to 4 percent.
Banks which are qualified to join the recapitalization program are those which have a CAR of between minus 25 percent and plus 4 percent.
Banks with a CAR below 25 percent do not qualify for the government-sponsored recapitalization program, and must inject fresh capital within 30 days or risk being closed down.
The government said earlier that of the country's 208 commercial banks, 10 foreign banks would not join the recapitalization program and 32 joint venture banks would use their own resources for recapitalization.
Of the remaining 166 commercial banks, all of them national banks, 54 already have a CAR of at least 4 percent, 56 have a CAR of between minus 25 percent and 3 percent, and 40 banks have a CAR below minus 25 percent. The remaining 16 banks have not yet completed their audits.
Bambang revealed that the government would need Rp 136.4 trillion to recapitalize the six troubled state banks.
These banks are Bank Pembangunan Indonesia, Bank Dagang Negara, Bank Bumi Daya, Bank Ekspor Impor Indonesia, Bank Rakyat Indonesia and publicly-listed Bank Negara Indonesia.
The other state bank, Bank Tabungan Negara, has not yet completed its audit.
Recapitalization of the first four state banks would be carried out by the newly-established Bank Mandiri. These four banks would eventually be merged with Bank Mandiri.
Bank Negara Indonesia - the only publicly-listed among the six - would issue right shares on the stock market to avoid ownership dilution of the minority shareholders.
Bambang said recapitalization would still cost less than the liquidation of these troubled state banks.
Liquidation would cost the government Rp 357.3 trillion, or 261 percent of the money needed for recapitalization.
The minister also revealed that it would need Rp 96.41 trillion to recapitalize the four banks taken over by the government last August -- Bank Central Asia, Bank Danamon, Bank PDFCI and Bank Tiara Asia.
Meanwhile, one of the 20 banks currently under the supervision of the Indonesian Bank Restructuring Agency already has a CAR of 4 percent, another one meets the qualification to join the recapitalization program, while the remaining 18 do not qualify.
The government needs Rp 22 billion to recapitalize the one eligible bank, and Rp 36.29 trillion to liquidate the other 18 banks.
As for the 15 regional development banks, the government would need Rp 1.3 trillion to recapitalize them.
The 44 private banks would need Rp 23.36 trillion for recapitalization. The government would provide 80 percent of this money.
Meanwhile, 19 privately-owned banks do not qualify for the recapitalization program, because their CAR are below minus 25 percent.
The government would need Rp 15.96 trillion to liquidate these banks.
The government has said it would fund the recapitalization program through the issuance of bonds. (prb/rid)