Half of all audited banks 'lack capital'

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)