IBRA warns banks not to rush to issue bonds
IBRA warns banks not to rush to issue bonds
The Jakarta Post, Jakarta
The Indonesian Bank Restructuring Agency (IBRA) warned the banks
under its supervision on Friday not to force themselves to issue
bonds whenever they wanted to strengthen their capital if other
options were available.
"If we can still seek funds from other sources, then why force
it?," IBRA deputy chairman I Nyoman Sender told reporters as
reported by detik.com.
"We need to assess this, both the benefits and losses. We also
need to examine the impact," he said, adding that a team had been
set up to carry out the assessment.
He was responding to requests from Bank Internasional
Indonesia (BII) and Bank Permata, two of the four banks operating
under IBRA supervision, to issue bonds to strengthen their
balance sheets.
The other two are Bank Lippo and Bank Danamon.
Sender was echoing IBRA chairman Syafruddin Temenggung, who
days earlier had issued a similar warning.
BII and Bank Permata seem to following the recent trend in
which banks, and also corporations, have been taking turns in
issuing bonds, making this a popular option amid a declining
trend in Bank Indonesia's benchmark interest rate.
Syafruddin has said that despite the fact that the country's
bond market had responded well to the bond issues, that did not
necessarily means that such a course was a risk-free option.
Among other dangers, he pointed out, the issuing of
subordinated bonds -- ones that were meant only to strengthen
working capital -- was not guaranteed by the government in event
of default. This meant there was a risk for investors.
As for those types of bonds that were guaranteed by the
government guarantees, the risks would be borne by IBRA.
As the majority shareholder in the two banks, IBRA will have
the obligation to cover payments on the bonds should one of the
banks fail to do so.
BII has proposed the issuing of Rp 2 trillion worth of bonds
as part of the bank's move to switch more of its financing into
longer maturities.
BII hoped the planned issue could take place in the second
half of the year.
Permata has also proposed issuing bonds in the form of mutual
funds backed by the recapitalization bonds it holds. The bond
issue is expected to be worth around Rp 1 trillion.
Permata, which emerged last year from the merger of Bank
Universal, Bank Bali, Bank Prima Express, Bank Patriot and Bank
Media Artha, currently holds about Rp 11.5 trillion in recap
bonds.