IBRA told to divest its ownership in three banks

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)