Govt to ease repayment terms for ailing banks
JAKARTA (JP): Minister of Finance Bambang Subianto confirmed on Friday the government would ease repayment terms for central bank liquidity support used by troubled banks to stay afloat.
The minister indicated the government might relent on its demand that owners of indebted banks repay in cash more than Rp 141 trillion (US$18.8 billion) in one year, the previously announced time period.
Bambang declined to disclose the revised debt repayment terms.
"You just have to be patient. The discussions on the issue aren't completed yet because there are various aspects that need to be looked at and agreed upon."
Although the government's target is to quickly obtain an optimum amount of payment in cash, he said "we would also consider a reasonable repayment period given to the bank owners".
The minister said companies and other fixed assets surrendered by the delinquent bank owners to the government in debt repayment must also be kept solvent to prevent job losses.
"The target is to get a more acceptable amount in cash ... but on the other hand we also have to consider a reasonable repayment period," he told reporters following the 52nd anniversary of the ministry.
Bambang's statement followed a report in the Oct. 27 edition of the Asian Wall Street Journal that IMF Asia Pacific Director Hubert Neiss objected to President B.J. Habibie's decision early this month to force the country's biggest conglomerates to repay the support in one year in cash.
Neiss reportedly urged "flexibility" in an Oct. 18 letter addressed to Habibie. Although agreeing the repayment period "should be as short as possible", he warned that "if all assets were dumped in a fire sale under presently depressed economic conditions, the return to the government would be very small".
Liquidity
Bank Indonesia funneled massive liquidity support beginning early this year to help banks in meeting massive withdrawals by panicked depositors and preventing a complete breakdown of the banking system amid an absence of confidence.
Owners of troubled banks are not only required to immediately repay the emergency funds injected by the central bank, but should also return most of the loans channeled to their affiliated companies.
Most of the institutions contravened the banking regulation limiting the loans to intra-group companies to 20 percent of their capital.
A Sept. 21 deadline was originally set for repayment of the liquidity support.
But the Indonesian Bank Restructuring Agency (IBRA) agreed to accept fixed assets of more than 120 companies ceded by the tycoons to repay Rp 79.9 trillion in debts. Surrendering the assets were the owners of the Salim Group, which controls the country's largest private bank, Bank BCA; Gadjah Tunggal Group, owner of the third largest bank, Bank BDNI, and Sudwikatmono, former owner of liquidated Bank Surya and a cousin of former president Soeharto.
Debts comprise mostly the emergency funds injected by the central bank and monies that must be paid by the owners to bring down their banks' legal lending limit (intra-group lending) to the 20 percent maximum level.
The September agreement over the assets was immediately thrown into confusion by some newspaper reports that the bank owners had been given five years to settle their debts.
Habibie flatly denied the reports and announced on Oct.1, that all the debts had to be repaid in cash within one year and not within five years as some newspapers had reported.
Among those failing to meet the Sept. 21 deadline were timber tycoon Mohamad "Bob" Hasan, co-owner of Bank Umum Nasional (BUN), and property mogul Usman Admadjaja, owner of the second largest private bank, Bank Danamon.
The government has closed down 26 commercial banks since November, including BUN and BDNI, and nationalized BCA, Danamon and two other institutions in August as the initial steps in the restructuring plan. (rei)