Government vows to recapitalize Bank Bali
JAKARTA (JP): The government announced on Thursday it would recapitalize Bank Bali to avoid a massive lay off of the bank's 6,000 employees and to help accelerate the recovery of the country's crisis-hit economy, according to Bank Indonesia deputy governor Subarjo Joyosumarto.
Subarjo said the decision was made by the Financial Sector Policy Committee (FSPC), which groups several senior government and Bank Indonesia officials.
"The recapitalization program will be implemented if the bank's legal problems have been resolved. We expect the legal process can be settled before the end of June 2000," he announced following the FSPC meeting.
Subarjo explained that the legal problems had to be settled first to avoid a lawsuit.
He said it was best for Bank Bali's former owner Rudy Ramli to drop his lawsuit against the central bank and the Indonesian Bank Restructuring Agency (IBRA) in a bid to speed up the recapitalization of the bank.
"A further delay will increase the recapitalization cost. The latest data of the recapitalization cost of Bank Bali is Rp 4.7 trillion, while its CAR was minus 31 percent. If this isn't immediately settled Bank Bali's losses will even be greater," he said.
CAR stands for capital adequacy ratio which is the ratio between the bank's capital and risk-weighted assets. The higher the CAR level, the healthier a bank is.
The government has stipulated that all banks must have a minimum CAR level of 4 percent by June this year, and 8 percent by the end of 2001.
The country's financial and economic crisis that started in the middle of 1997 greatly slashed the CAR level of domestic banks into negative territory.
IBRA nationalized the ailing Bank Bali last year after the Ramli family failed to come up with suitable investors to help finance its recapitalization.
Bank Bali's recapitalization was supposed to be completed last year, but the bank was hit by a high profile financial scandal in July allegedly involving senior government officials and politicians from the Golkar Party, the ruling party at the time.
Rudy has filed a lawsuit against Bank Indonesia and IBRA at the Jakarta State Administrative Court over the decision to nationalize his bank.
A source said that Rudy met with senior government officials at the central bank on Thursday and agreed to drop his lawsuit.
Meanwhile, some 500 staff members of Bank Bali held on Thursday a peaceful rally at the bank's headquarters in Jakarta calling on the government to recapitalize the bank.
Bank Bali staff union head Ary Satrio said the bank's staff was disturbed by recent comments by Bank Indonesia officials claiming the government might liquidate the bank.
Ary said Bank Bali must not be liquidated because it is a good bank with many branches throughout the country.
He also said the bank had managed to maintain depositors' confidence as reflected in the increase in third party funds by Rp 476 billion to Rp 7.9 trillion compared to the level in December.
"We firmly believe that recapitalizing Bank Bali is the best option for the government rather than liquidation," he said.(rei)