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)