Govt urges Permata to explore rescue plans

The Jakarta Post, Jakarta

Bank Permata, caught in the middle of a legal dispute between the Indonesian Bank Restructuring Agency (IBRA) and the Attorney General's Office, has been asked to study options to salvage the bank in case resolution of the dispute causes harm to its capital.

State Minister of State Enterprises Laksamana Sukardi said on Monday that one possible option was to raise money from investors via private placement.

"Support from the government would not be easy because of the tight state budget. The quickest way should be through private placement.

"But we need to ensure this is in line with the overall economic climate," Laksamana said.

Laksamana's office oversees IBRA, which owns 99.6 percent of the medium-sized bank.

His remarks could send signals the bank would be privatized sooner than the initial schedule of next year.

Permata emerged last year as the country's 10th-largest bank from a merger of five ailing banks controlled by IBRA, including Bank Bali, Bank Universal, Bank Arthamedia, Bank Prima Express and Bank Patriot. The agency, which took over several troubled banks in the wake of the late 1990s financial crisis, used public funds to finance the merger process.

As of the first quarter of 2003, Permata booked a Rp 102 billion net profit, with total assets of Rp 28 trillion. The bank's capital adequacy ratio (CAR) reached 10.3 percent, above Bank Indonesia's minimum requirement of 8 percent.

The financial health of the bank, however, is now in danger after a revelation that IBRA, in the merger process, had used funds totaling Rp 456.5 billion -- not supposed to have been used as they served as evidence in legal proceedings involving director of PT Era Giat Prima (EGP) businessman Djoko Tjandra, in a case popularly known as the Bank Bali scandal.

The scandal, which came to light in 1999, revolved around the accusation that Djoko and a couple of other influential people obtained the money from Bank Bali in a transaction that was against the law and caused losses to the state.

During the legal proceedings, the funds were stashed in Bank Bali in an EGP escrow account.

Things turned from bad to worse for IBRA after the Supreme Court cleared Djoko off all charges, meaning that IBRA had to return all the funds to EGP. Since then, IBRA has been trying hard to keep the money within the bank to avoid serious harm to Bank Permata, despite pressure from the Attorney General's Office.

Against this backdrop, calls have been rising for the bank to start drawing up plans to free itself from the looming financial troubles, with Laksamana's being the latest.

Laksamana said that the government, as Permata's majority shareholder via IBRA, would ask the bank's management to prepare and explore possible options as rescue plans.

Initially, IBRA had planned to divest the majority of the bank only after it had completed the divestment process of Bank Lippo and Bank Internasional Indonesia (BII), both of which are expected to be concluded by the end of the year.