Half of all audited banks 'lack capital'

JAKARTA (JP): About half of the country's commercial banks already audited by international accountants and the central bank have acute lack of capital, Bank Indonesia Governor Sjahril Sabirin said on Thursday.

Of the 80 banks audited, most had a capital adequacy ratio (CAR) of less than 4 percent.

"Only a few have a CAR of more than 4 percent," he told reporters following a seminar on economic and debt restructuring.

He declined to name the banks.

The financial authorities have ordered the country's commercial banks to have a minimum CAR of 4 percent by the end of the year.

Of the more than 200 commercial banks in the country, about 50 troubled institutions are now under the Indonesian Bank Restructuring Agency (IBRA).

All of the latter have been audited, but Sjahril said the 80 banks were outside of IBRA's control.

Under the government recapitalization program, banks which have a CAR level of between minus 25 percent and less than 4 percent will have to submit a recapitalization plan a month after the banks have been notified of their capital condition.

The government will provide up to 80 percent of the cash needed for the recapitalization by issuing bonds, which could be redeemed by the bank owners in three years or offered by the government to new investors.

Sjahril said 12 banks were notified of their CAR condition last week, and about 15 banks would be summoned throughout this week.

The country's banking sector has been punished by the sharp plunge in the rupiah.

Restructuring of the sector is regarded as key to the country's economic recovery.

The government has closed down 26 banks since November, and nationalized four institutions, including the two largest private banks, BCA and BDNI.

It has also provided more than Rp 141 trillion in liquidity support to help the banks meet massive withdrawals by panicked depositors.

Fourteen banks have been a given a year to repay the government loans.

Foreign investors are expected to be the key source of financing for the bank recapitalization.

The House of Representatives is expected to approve the country's new banking law today, which would effectively eliminate the limitation on foreign ownership in the banking sector. Under the present ruling, foreign ownership is capped at 49 percent. (rei)