House members support plan to recapitalize BRI, BTN

House members support plan to recapitalize BRI, BTN

JAKARTA (JP): Majority members of the House of
Representatives commission IX on banking and state budget
approved the government's proposal to recapitalize state Bank
Rakyat Indonesia (BRI) and Bank Tabungan Negara (BTN).

But until midnight on Friday, the final approval on BRI and
BTN recapitalization had not yet been given as debates over the
publicly listed Bank Bali still proceeded.

Finance Minister Bambang Sudibyo met with the commission late
on Friday to get House approval for the recapitalization of the
three banks.

The approval will allow the government to entirely complete
the country's crucial bank recapitalization program.

The director general of banking and financial institutions at
the Ministry of Finance, Darmin Nasution, said earlier at the
meeting with the commission that the government would
recapitalize BRI in two tranches at a total cost of Rp 29.15
trillion (US$3.22 billion).

He said the first tranche would be completed by the end of
this month and cover 70 percent of the bank's total
recapitalization cost. He said the remaining 30 percent would be
completed by the end of October.

The government will inject bonds to finance the
recapitalization of the banks.

Darmin was speaking at the hearing session which was also
attended by Indonesian Bank Restructuring Agency chairman Cacuk
Sudarijanto and senior officials of BRI, BTN and Bank Bali.

Darmin also said the government would issue hedge bonds in
October to protect the open net position of BRI in case of
currency fluctuations.

The government recently reshuffled BRI's top management, a
precondition for the recapitalization demanded by the
International Monetary Fund, which is providing a multibillion
dollar bailout package to help finance the country's economic
reform program.

Darmin said that under BRI's business plan, the bank would now
focus on micro and retail financing. He said that by the end of
2000, the bank must increase its micro and retail financing to
more than 80 percent of total lending, while corporate lending
must be below 20 percent from the current level of more than 25
percent.

Micro and retail financing is defined as providing loans of
less than Rp 50 billion.

He said BRI would still be allowed to lend to the corporate
sector, but only to the agribusiness industry.

BRI had total assets of Rp 29.69 trillion as of the end of
last year, with assets expected to increase to Rp 60.1 trillion
by the end of 2001.

The recapitalization of BTN also will take place in two
tranches at a total cost of around Rp 14 trillion. The first
tranche is to be completed by the end of this month and the
second in October. The government also will issue hedge bonds for
the recapitalization of BTN.

The secretary-general at the Ministry of Finance, Noor Fuad,
said BTN would now focus solely on its original core business,
which was providing loans to develop middle to low-cost housing.

The government initially planned to recapitalize BRI and BTN
in May, but the program was delayed. In the case of BRI, the
delay was due to a dispute between the government and Bank
Indonesia in appointing the bank's new top management. BTN's
recapitalization was pushed back to restructure the bank's core
business.

Meanwhile, the cost of recapitalizing Bank Bali will be
approximately Rp 5.3 trillion, up from the initial estimate of Rp
4.9 trillion. (rei)