Fri, 09 Jun 2000

IBRA told to divest its ownership in three banks

JAKARTA (JP): The Financial Sector Policy Committee (KKSK) has recommended that the government divest its ownership in three publicly listed banks, including Bank Internasional Indonesia, Bank Niaga and Bank Universal.

KKSK secretary Sjafruddin Tumenggung said on Thursday that the committee had asked the Indonesian Bank Restructuring Agency (IBRA) to make the disposal plans.

"We have asked IBRA to immediately prepare the divestment plans to be submitted to the DPR (House of Representatives)," Sjafruddin told reporters following a KKSK meeting.

KKSK is chaired by the Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie, and its members include senior economics ministers.

The government, through IBRA, controls a majority stake in the three publicly listed banks after it helped finance their recapitalization.

IBRA has said it would divest its ownership in the banks to raise cash to help finance the state budget. The agency is targeted to raise some Rp 18.9 trillion in cash this year.

Sjafruddin also said that KKSK had decided to complete the recapitalization of Bank Bali by the end of this month.

He said that the recapitalization cost of the bank was estimated to reach some Rp 4.84 trillion (US$569.41 million).

"Whatever happens, the recapitalization of Bank Bali must be completed by the end of June," he said.

The government was supposed to have recapitalized the bank last year, but it was delayed due to the outbreak of the high profile Bank Bali scandal in August 1999.

The recapitalization was further delayed after former Bank Bali owners and CEO Rudy Ramli filed a suit against Bank Indonesia and IBRA, which nationalized the bank last year.

The government has called on Rudy to drop the suit as a precondition for the government to recapitalize Bank Bali, but the latter still persists.

Sjafruddin said that KKSK had ordered IBRA to "secure" the recapitalization program of Bank Bali from the legal battle.

He did not clarify any further.

"If we have to wait until the legal process is completed, Bank Bali will continue to bleed and boost the recapitalization cost," Sjafruddin said.

Sjafruddin also said that KKSK had agreed to finance the second recapitalization of Bank Danamon by the end of June at an estimated cost of Rp 28.87 trillion.

The government was supposed to have completed the second recapitalization of the bank in May, but it was delayed after KKSK demanded that IBRA review the cost once again and make sure that everything was "proper".

The government recapitalized Bank Danamon last year, but the bank had to be recapitalized again as it was to be merged with eight smaller banks which had negative capital adequacy ratio (CAR).

Sjafruddin said that Bank Danamon was expected to have a CAR level of about 32 percent after the recapitalization program was completed.

Under the initial scenario, the bank was supposed to have a CAR level of about 36 percent once the recapitalization program was completed.

But another delay further eroded the capital condition of the eight smaller banks, including Bank Rama, Bank Tiara Asia, Bank Duta, Bank PDFCI, Bank Tamara, Bank Pos, Bank Jaya and Bank Nasional Nusantara.

Head of the Bank Danamon merger team Safrullah Hadi Saleh said that for each month of delay, the eight banks would suffer between Rp 350 billion to 400 billion in losses.

Safrullah is convinced that the government will not again delay the recapitalization program of Bank Danamon.

Bank Danamon had also been nationalized by the government.(rei)