House slams Lippo Bank recapitalization
JAKARTA (JP): The House of Representatives has demanded the government either revoke, postpone, or revise the decree which includes two privately owned banks in the first group of banks to be recapitalized by the government.
The head of the House's commission in charge of the state budget and banking, Taryo Tarmadi, said that the inclusion of Lippo Bank and Bank Sembada Artanugroho (Sanho Bank) was against an earlier agreement between the House and the government to include only state and provincial development banks in the first stage of the recapitalization program.
"It's up to the government to choose among these three alternatives. But if the new policy doesn't satisfy us we'll summon the finance minister again," he told reporters after a special hearing on the bank recapitalization program with Finance Minister Bambang Subianto late on Thursday.
The government quietly issued a decree on Jan. 18 stipulating that Lippo and Sanho together with 10 other regional banks would be the first batch of banks to be recapitalized by the government.
The decree stipulated that Lippo would get Rp 3.75 trillion of the Rp 4.29 trillion earmarked for the first stage of recapitalization.
The decree was leaked to the press last week, raising speculation that the cozy relations between Lippo's owners, the Riady family, and President B.J. Habibie was responsible for the giving the bank priority.
The government has repeatedly denied this allegation, arguing that Lippo and Sanho were the only two private banks that had fulfilled the requirements to join the recapitalization program, including providing at least 20 percent of the funding needs in cash.
The government has promised to provide up to 80 percent of the recapitalization funds by issuing bonds.
The government has also been criticized for the lack of transparency in the recapitalization program, which Bambang admitted to in the meeting with the legislature and promised to improve.
Bambang also told the House that the government had not injected capital into the two banks as further scrutiny and calculations were needed.
He said the capital injection would start when the government had reached an agreement with the House on the proposed 1999/2000 state budget.
The House is expected to approve the budget proposal on Feb. 26.
The Ministry of Finance plans to sell bonds to the central bank, and assign the proceeds to the recapitalized banks, which will immediately use the cash to buy the bonds from Bank Indonesia. The banks will receive fresh funds from the coupon rates of the bonds.
The coupon rate is estimated to amount Rp 34 trillion, in which Rp 18 trillion will be covered by the 1999/2000 state budget, while the remaining Rp 16 trillion will come from the sale of assets owned by troubled banks taken over by the government.
Noted economist Anwar Nasution criticized the government for the program's lack of transparency, but warned that political criticism of the inclusion of Lippo Bank could put the country's recapitalization program off track.
"In my personal view, Mochtar Riady (owner of Lippo) is one of the country's best bankers, much better those who run state banks," he told reporters following a seminar on Thursday. (rei)