IBRA cedes control of Bank Bali

IBRA cedes control of Bank Bali

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA)
ceded management control of Bank Bali to Standard Chartered Bank
as an inducement for the UK bank to take a 20 percent stake, an
IBRA advisor said on Tuesday.

Adriansyah Chaniago said that Standard Chartered Bank was
doubtful about entering Bank Bali after the latest due diligence
showed the latter institution needed about Rp 4.3 trillion,
compared to the initial estimate of Rp 2.8 trillion in December,
to lift its capital adequacy ratio (CAR) to the minimum 4 percent
level.

"We had to give the incentive... so that Standard Chartered
would no longer be doubtful," he told a news gathering.

Standard Chartered is the first foreign bank to control the
management of a local bank. The precedent is expected to lure
other overseas banks to enter local institutions, which are in
dire need of foreign capital due to huge problems.

The entry of foreign banks also will help minimize government
spending on the bank restructuring and recapitalization program
which is estimated to cost about Rp 550 trillion, roughly 50
percent of the country's gross domestic product.

IBRA announced on Monday it would let Standard Chartered Bank
head Bank Bali's new management team.

Standard Chartered appointed its Southeast Asia head for
corporate and institutional banking Douglass Beckett to lead Bank
Bali. He will be assisted by several local senior officials of
Bank Bali.

IBRA said the management reshuffle was part of an investment
agreement in which Standard Chartered would buy a 20 percent
stake in Bank Bali through a rights issue process.

The agency said that it would be the standby purchaser of the
remaining unsubscribed issue.

Bank Bali is scheduled to offer a rights issue in October to
raise about Rp 4.3 trillion for its recapitalization program.

Adriansyah said that if Standard Chartered purchased the
rights issue amounting to a 20 percent stake, it would be given
the option to own up to a 100 percent share in Bank Bali in five
years' time.

But he warned it might be forced to cede management control if
it failed to buy the minimum 20 percent stake.

The government earlier sponsored the recapitalization program
of seven private banks and four nationalized banks. Bank Bali was
supposed to join the first group in the recapitalization program,
but its involvement was delayed after Standard Chartered said in
April it was interested in buying a 20 percent stake.

The delay was permitted to allow the foreign bank to audit
Bank Bali's financial condition.

Adriansyah said IBRA had to take over Bank Bali from its
founding owner, the Ramli family, on July 23 because Standard
Chartered did not realize its plans by the deadline due to
concern over the doubled recapitalization estimate.

Most banks in the country continued to suffer negative
interest rate spreads between January and May amid a high
interest rate environment, with their CAR deteriorating further.

Bank Indonesia Governor Sjahril Sabirin said on Tuesday that
the move was part of efforts to speed up the recapitalization
program of the banking sector, an essential factor for the
country's economic recovery.

"The move was made to accelerate the recapitalization
process," he said on the sidelines of a seminar.

Separately, Beckett promised on Tuesday that the new
management team would not resort to layoffs, saying he was
optimistic that Bank Bali would grow.

He told a news conference that Bank Bali would resume lending
once the recapitalization program was completed.

Meanwhile, outgoing Bank Bali president Rudy Ramli said that
his family did not have plans to take back control of the bank.
(rei/cst)