IBRA will finish bank restructuring by December: Govt

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) is expected to complete its rehabilitation of the local commercial banks under its supervision by the end of this year, Minister of Finance Bambang Subianto said on Monday.

He said that starting next year the state-sponsored IBRA would focus its efforts on dealing with the bad assets of commercial banks through the asset management unit (AMU).

"By the end of December 1998, IBRA expects to have completed its bank restructuring program," he told the House of Representatives during the plenary session on the government- proposed bill on the amendment of the 1992 Banking Law.

IBRA, which was launched early this year, has a mission to restructure the country's ailing banking industry and to recover Bank Indonesia's massive liquidity support of more than Rp 140 trillion (about US$12 billion) given to banks to help meet withdrawals by panicked depositors.

The agency currently supervises 38 private commercial banks which have received liquidity support equivalent to more than 200 percent of their paid-up capital.

The government suspended three IBRA banks last month and nationalized four banks in a first major step to clean up and restructure the banking sector.

The government is expected to complete its auditing all of the country's banks by next month, and may have to close down banks which are not able to meet the 4 percent minimum capital adequacy ratio requirement by the end of this year.

Bambang said that local cash-strapped banks might have to invite foreign investors to recapitalize their operations.

"The country's banking sector critically needs a massive cash injection to restructure its capital. Due to the limitation of domestic cash sources, the huge capital need is expected to come from foreign investors," he said.

"This is why we're giving more opportunities to foreign investors to enter the banking sector," he added.

The new banking bill will include the elimination of the foreign ownership limit of local banks, current capped at 49 percent.

Foreign investors are also expected to buy the nonperforming assets of local banks.

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita has said that if the banks under IBRA's supervision failed to pay their obligations to the central bank, the government would seize their assets.

He cited examples of such assets as Mohammad "Bob" Hasan's paper manufacturer PT Kiani Kertas in the case of Bank Umum Nasional, and Liem Sioe Liong's car making unit PT Indomobil, food giant PT Indofood Sukses Makmur or cement maker PT Indocement Tunggal Prakarsa in the case of Bank Central Asia. Properties in the Sudirman central business district could be seized in the case of Bank Dagang Nasional Indonesia.

Bambang has reported that the government has received statements from the owners or founders of BCA, Danamon, BDNI and BUN on their willingness to provide the banks with fresh funds or assets.

But he reiterated that the amount of funds and assets should cover all credits extended to their groups, including the central bank's liquidity support.

He said the banks had until Sept. 21 to submit the fresh funds or fixed assets.

Bambang said recently that nonperforming loans were expected to reach 50 percent of the more than Rp 600 trillion in outstanding loans or around 40 percent of the country's gross domestic product. (rei)