Government vows to recapitalize Bank Bali

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)