IBRA will finish bank restructuring by December: Govt

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)