Govt shuts 16 banks in first reform move
JAKARTA (JP): The government closed 16 ailing private banks yesterday as part of the International Monetary Fund's reform package to restore confidence in the country's economy.
The government assured that small depositors -- those who have less than Rp 20 million -- would be reimbursed of their funds from one of the state banks. Bank Negara Indonesia, Bank Rakyat Indonesia and Bank Dagang Negara have been appointed to make payments to these depositors starting on Nov. 13.
Big depositors and other creditors will have to wait until the banks have liquidated their assets and paid off their tax obligations to the state before settlements can be reached.
Minister of Finance Mar'ie Muhammad announced the bank closures at the State Secretariat, saying the move should improve the country's banking system.
"This is part of the government's efforts to revitalize our financial sector," he said.
The action followed consultations with the IMF, the World Bank and the Asian Development Bank (ADB), he said.
The three institutions along with several foreign donor governments have committed more than US$30 billion in assistance to help the ailing Indonesian economy.
The financial and banking sector was one of the key areas in the government's reform package announced Friday after two weeks of tough negotiations with the IMF team.
Present at yesterday's announcement were Minister/State Secretary Moerdiono, Bank Indonesia Governor J. Soedradjad Djiwandono and Minister of Industry and Trade Tunky Ariwibowo.
Soedradjad said the financial conditions and business development of the banks had been determined to be unhealthy.
"These banks are insolvent to the point of endangering their continuity, disturbing the overall banking system and harming the public interests," he said.
Several banks closed were owned by politically connected business figures. Bank Industri was controlled by Hashim Djojohadikusumo of the Tirtamas Group and Bank Rakyat Indonesia; Bank Andromeda was owned by Prayoga Pangestu of the Barito Pacific; Bank Pacific by Ibnu Sutowo, former president of state- owned oil firm Pertamina; and Bank Jakarta by Probosutedjo, half- brother of President Soeharto.
Soedradjad said the government was providing Rp 2.3 trillion to help pay minor depositors.
These, he said, accounted for 93.7 percent of all depositors in the 16 banks, but only 15 percent of third party funds in the banks.
The government would not provide bridging finance for creditors, such as other banks or holders of commercial papers issued by the liquidated banks. These would be paid from proceeds from sales of the banks' assets, he said.
People or institutions who owed money to the dissolved banks must fulfill their obligations or face legal action if they refused to pay, Soedradjad said.
Rumors of impending liquidation have been circulating through the country for the past week, with speculation focusing on troubled banks.
Sources close to the negotiations said the IMF had insisted on a longer list of banks -- some said 23 and others claimed 19 -- but the others were removed following eleventh-hour bailout.
Mar'ie said the government is asking shareholders of the banks to liquidate the assets and assume all responsibilities arising from the liquidation process.
"Owners or shareholders and management teams of the closed banks are asked not to leave Indonesia, in order to complete the liquidation process," he said.
Moerdiono said owners and shareholders must be held responsible for all consequences that would arise. "That's only fair. When their banks made profits, they enjoyed the fruits; now that the banks suffer losses, it's only right that they should bear the losses."
Soedradjad called on the public to remain calm.
He said a joint team from the central bank, the Ministry of Finance, the Attorney General, the National Police and the Ministry of Manpower would handle all matters arising from the bank liquidations.
Bank Indonesia has also opened an Internet website (http:/www.bi.go.id at what's new menu) to provide real time information on the process of the liquidations.
Police are on alert for possible massive panic.
Jakarta Police Spokesman Lt. Col. E. Aritonang said the city police were ready to handle the situation.
"We are offering mediation services for both the banks and customers to solve any possible disputes arising," he said.
Aritonang said the public, especially bank depositors, should not to be influenced by malicious rumors.
"If you need information, call Bank Indonesia or the nearest police precinct," he said.
News of the liquidation was taken on the chin by some depositors, but was met with anger by others.
Bank Indonesia said minor depositors should go to their banks to sort out administrative issues before they could claim their money from the appointed state banks.
Dita Daniswira, a 22-year-old student who has Rp 5 million in Bank Pacific, said she was shocked to hear the news.
"I'm not looking forward to lining up at the bank on Monday. I've got to prepare for the worst treatment from the bank officers," she said.
Nikolas Simanjuntak, a lawyer in Jakarta who had a small savings account at the BHS branch in Bendungan Hilir, said his first reaction was panic.
"I've been a BHS client for a long time.
"I still don't know how I will get my money back. I'll just have to go there and find out on Monday."
Limin Sebayang, a farmer in Medan, said he had Rp 15 million in the local branch of South East Asia Bank, which he saved to finance the schooling of his children.
"They (the bank) offered the highest interest rates.
"I tried to get all my money on Friday when I first heard the rumors, but the bank was not giving out any money.
"I phoned Bank Indonesia (branch office in Medan) but it was closed for the weekend," Limin said.
"I just want to know when I will get my money back."
Anton Lembong, a 27-year-old Jakarta businessman, said he tried desperately to get his Rp 35 million from an account at Andromeda Bank yesterday.
"At first, they refused without giving any reason. After I got angry, one of the officers told me that the bank had run out of money," Anton said, adding that he had chosen Andromeda because the bank was popular and his father had also used the same bank.
"Half of that money belongs to my business partner," he said.
"I'm ruined." (team)
No. Liquidated Bank Paying Bank
-----------------------------------------
1. Bank Harapan Sentosa BRI
2. Sejahtera Bank Umum BDN
3. Bank Andromeda BNI
4. Bank Pacific BNI
5. Bank Astria Raya BDN
6. Bank Guna Internasional BDN
7. Bank Dwipa Semesta BNI
8. Bank Kosagraha Semesta BRI
9. Bank Industri BRI
10. Bank Jakarta BDN
11. Bank Citrahasta D. BNI
12. South East Asia Bank BDN
13. Bank Mataram Dhanarta BNI
14. Bank Pinaesaan BNI
15. Bank Anrico BRI
16. Bank Umum Majapahit BDN