Government transfers Bank Bali back to Bank Indonesia

JAKARTA (JP): The Financial Sector Policy Committee (FSPC) decided late on Thursday to transfer Bank Bali from the Indonesian Bank Restructuring Agency (IBRA) into the hands of Bank Indonesia.

The move could lead to the closure of publicly listed Bank Bali unless its former majority owners can come up with the necessary cash requirement to recapitalize the bank.

Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie, who also heads the FSPC, said that after making a thorough study the committee decided that IBRA must honor the recent ruling of the Jakarta Administrative Court that the nationalization of Bank Bali by the agency was unlawful.

"So it's now up to Bank Indonesia to decide what it wants to do with Bank Bali. IBRA no longer has any responsibility (over Bank Bali). After all, Bank Indonesia is now 100 percent independent," Kwik told reporters following a meeting of the FSPC, which groups several senior economics ministers.

Under the country's banking law, Bank Indonesia still retains its supervisory role over the banking sector. The independent central bank will relinquish that supervisory responsibility in 2002.

The meeting was also attended by senior officials of IBRA and Bank Indonesia.

"We think that it's best if we honor the court's decision because Indonesia is a law-abiding nation," Kwik said when asked for the reason behind the surprise FSPC decision.

But he declined to say whether the move would lead to the liquidation of Bank Bali. "It's really up to Bank Indonesia; you can ask them."

Bank Indonesia senior deputy governor Anwar Nasution, who attended the meeting, refused to make any comments.

Bank Indonesia decided last July to transfer the fate of Bank Bali to IBRA, the first step toward nationalization and eventual recapitalization.

The central bank transferred Bank Bali to IBRA because the bank's former owner, the Ramli family, could not come up with the 20 percent cash requirement to help recapitalize the bank.

Under the country's bank recapitalization program, the government will finance up to 80 percent of a bank's recapitalization cost by injecting bonds.

But Bank Bali former owner and CEO Rudy Ramli filed a suit against the government's takeover of his bank, and the Jakarta Administrative Court unexpectedly ruled in favor of Rudy.

Bank Indonesia and IBRA then launched an appeal.

But Kwik said that with the new decision, IBRA would no longer continue with its an appeal.

"IBRA will honor the court's decision," he said.

The government initially planned to complete the recapitalization of Bank Bali by June at a cost of Rp 4.9 trillion.

But the plan had to be delayed after the House of Representatives demanded that the government first settle its legal dispute with Rudy over fears that he might win the case while the government had spent a lot of money on recapitalizing the bank.

The government has said that each month of delay in the recapitalization of Bank Bali would inflate the cost by Rp 40 billion.

It is not clear whether Rudy has enough cash to help finance the recapitalization of his bank.

Rudy told the media on Wednesday that he would drop his lawsuit and claim of ownership of Bank Bali if the government paid him some Rp 9 billion in compensation and froze the rights of Bank Bali's current controlling shareholders, Deutsche Bourse Clearing AG, to sell or buy the bank's shares.

Rudy also demanded that the government freeze the voting rights of DBC, a German-based investment firm.

Separately, chairman of the country's Capital Market Supervisory Agency (Bapepam) Herwidayatmo said the agency could freeze the voting rights of DBC, but could not freeze its rights to sell or to buy.

He did not say whether the agency would freeze the voting rights of DBC, but said that Bapepam had formed a new team to uncover the investors behind DBC, who had amassed more than 50 percent of Bank Bali's shares.

Elsewhere, Kwik said that IBRA had handed the case of the former owners of four closed banks over to the Attorney General's Office.

He said that the former owners of the four banks, including Bank Dewa Rutji, Bank Central Dagang, Bank Aspac and Bank Orient had been uncooperative in settling their obligations to the government.

Kwik said that the top priority of the Attorney General's Office would be to maximize the recovery of the state's money, while legal action would be the last resort. (rei)