Govt to inject Rp 4t into merged Bank Bali

Govt to inject Rp 4t into merged Bank Bali

The Jakarta Post, Jakarta

The government will inject some Rp 4 trillion (US$450 million)
into Bank Bali after the bank is merged with four weaker banks,
according to the Indonesian Bank Restructuring Agency (IBRA).

IBRA said in a statement on Wednesday that the publicly-listed
Bank Bali would issue new shares at the end of September, while
the government would act as the underwriter.

The capital injection is needed to keep Bank Bali's capital
adequacy ratio (CAR) above the 8 percent minimum level set by the
central bank.

CAR is the ratio between capital and risk-weighted assets.
The higher the CAR, the healthier the bank is.

The government is planning to merge Bank Bali with four other
banks, including Bank Universal, Bank Prima Express, Bank
Arthamedia and Bank Patriot. The newly-merged bank will use the
Bank Bali name.

Of the five banks, only Bank Bali has a relatively strong CAR
level, while the others are poorly capitalized. As of March, Bank
Patriot's CAR stood at 1 percent, while Bank Universal's and Bank
Prima Express' CAR stood at minus 16.6 percent and minus 49.4
percent respectively.

Merging the weaker banks with Bank Bali will cause the
latter's CAR level to plunge to below the minimum 8 percent
level. That is why the government needs to recapitalize Bank Bali
after the merger.

The five banks to be merged are among 11 private banks under
the control of IBRA, which is in charge of leading the banks back
into good financial shape before returning them to the private
sector.

Merging local banks is seen as part of the effort to
restructure the country's troubled banking industry.

A healthy banking sector is crucial to accelerating the
country's economic recovery process.

IBRA was set up in 1998 to manage assets and loans it took
over from the collapsed banking system after a $60 billion
financial sector bailout following the 1997-1998 Asian financial
crisis.