IBRA installs new management team for BII
The Jakarta Post, Jakarta
The Indonesian Bank Restructuring Agency (IBRA) installed on Friday a new management team for ailing Bank Internasional Indonesia (BII) as one of the conditions set by the House of Representatives for a government-sponsored bailout program.
"We hope that the legislators in House Commission IX will give their full support (to the bailout plan)," IBRA Chairman Syafruddin Temenggung told a news conference.
He added that the reshuffle was also aimed at improving public confidence in the bank.
Legislators earlier demanded that IBRA, which controls 75 percent of the publicly listed bank, unseat senior executives still linked to the Widjaja family, the founder of BII, who has been faulted for the near-bankrupt status of the bank.
The new management team of BII is now chaired by Sigit Pramono from state Bank Mandiri. The team members are: Armand Arief (from Bank Danamon), Sukatmo Padmosukarso (Bank Mandiri), Halim Sutanto (BII), Judi Sujono (BII), Rudi Hamdani (BII) and Dira Mochtar (IBRA).
IBRA also installed a new supervision team for BII, spearheaded by Soedarjono, the former commissioner of Bank Danamon. Members include Putu Antara, the former commissioner of Bank Danamon, Sumantri Slamet, IBRA deputy chairman, Pradjoto, a legal banking expert, and Fuad Rahmani, a senior official at the Ministry of Finance.
IBRA, an agency under the office of the State Minister of State Enterprises, has proposed for BII to launch a rights issue to raise some Rp 4.3 trillion (US$466 million) in funds to boost its capital adequacy ratio (CAR) to 17 percent from minus 47 percent at the end of last year.
The agency is planning to meet with the House on May 23 to seek approval of the controversial plan.
Some legislators and analysts have called on the government to stop using taxpayers money to bail out BII.
The government first injected bonds worth Rp 6.6 trillion in 1999 into the bank to boost its CAR level to beyond the minimum 4 percent requirement. The CAR is the ratio between capital and risk-weighted assets. The higher the CAR the better the condition of the bank.
Until now, the government has injected some Rp 21 trillion worth of bonds whose interest rate is covered by the already strained state budget.
Under the third bailout program, the bank will offer new shares to the public to raise the necessary funds. But in case no investors are willing to exercise their rights, the government will purchase all the new shares.
IBRA has repeatedly said that salvaging the bank through a rights issue would be the best and cheapest option on the table compared to other choices, such as a merger, acquisition or liquidation.
Given the huge sum that the government has to allocate for the rights issue plan, debates have been rife whether the plan is indeed the best alternative in terms of funding requirements.
Some have suggested that BII should instead be included in the planned merger of five weak banks to minimize the costs on the part of the government.
The five banks to be merged are Bank Bali, Bank Universal, Bank Artha Media, Bank Patriot and Bank Prima Express.
They argued that merging six banks would definitely cost less.