Govt's Bank Exim loan converted into equity

JAKARTA (JP): The government has converted Rp 20 trillion in liquidity support given to the state Bank Expor Impor Indonesia (Bank Exim) into additional equity in the bank.

The decision was contained in Government Regulation No. 60/1998.

Bank Exim received liquidity support from the central bank equivalent to more than 500 percent of its capital to help it cope with cash flow problems.

In early March, the bank was reported to have incurred a massive loss through foreign exchange forward transactions made before the crisis broke in July 1997.

The liquidity support conversion is the first step towards merging the bank with four other state banks -- Bank Bumi Daya (BBD), Bank Pembangunan Indonesia (Bapindo), Bank Dagang Negara (BDN), and Bank Rakyat Indonesia (BRI), which specializes in corporate business.

BRI will only handle small credit issues and the retail banking business to sustain the development of small enterprises and cooperatives.

Performing BRI loans will be transferred to the new bank, while non-performing loans from BRI's corporate division, BBD, BDN, and Bapindo will be transferred to the Indonesian Bank Restructuring Agency's (IBRA's) asset management unit.

The government plans to inject new capital into the merged bank to enable it to meet the 4 percent minimum capital adequacy ratio (CAR) by the end of this year.

Restructuring of state banks is part of the government's efforts to rehabilitate the country's troubled banking sector.

Audits of all the country's 200 plus commercial banks are expected to be completed by the end of October. Banks shown to be incapable of meeting the CAR requirement will be suspended.

The government has so far closed down 26 commercial banks since the crisis started in the middle of last year. (rei)