Listed firms get lending privilege from central bank

Listed firms get lending privilege from central bank

JAKARTA (JP): Bank Indonesia, the central bank, yesterday
announced a new policy giving loan privileges to publicly listed
companies and raising the required capital of foreign exchange
banks.

The central bank said in a statement that a company whose
ownership, organization or finance is related to other firms is
now regarded as an independent enterprise -- instead of belonging
to a group of firms -- which can raise a loan from a bank by up
to 20 percent of the bank's capital if more than 30 percent of
its shares are listed on the capital market.

"This privilege is aimed at encouraging companies to list more
shares on the capital market," the statement read.

According to regulations on legal lending limits, loans for an
individual company are limited to a maximum of 20 percent of a
bank's capital and those for a group of companies also at a
maximum of 20 percent of the capital.

Yesterday's statement explained that a company falls under the
criteria of a group if 35 percent or more of its shares are owned
by another company, an individual or jointly by a family; if it
controls at least 35 percent of the shares of another company; if
a member of the company's board of commissioners or directors is
an executive at another company; or if there are financial links
which give another company control of its operation.

The criteria, however, will be ineffectual if the amount of
shares floated by a company on the stock exchange falls to or
below 30 percent, or if a number of its shares are purchased by
another company of its group, resulting in public ownership to
become less than 30 percent.

Foreign exchange

The statement also announced yesterday that non-foreign
exchange banks could now operate as foreign exchange banks only
after owning a paid-up capital of at least Rp 150 billion
(US$66.75 million), up from the previous minimum requirement of
Rp 50 billion.

Non-foreign exchange banks should also demonstrate that they
have been healthy for the last 24 months; that the ratio of their
loans against risk-weighted assets (capital adequacy ratio) has
reached 10 percent in the last month; and that they have prepared
the necessary adjustments of management to conduct foreign
exchange activities.

According to the statement, the new requirement is expected to
encourage banks to merge, strengthen their capital structure and
step up efficiency which, in turn, will enable them to face
fiercer competition in the future.

The statement said that a non-foreign exchange bank which
cannot meet the Rp 150 billion paid-up capital requirement can
improve its status as a foreign exchange one if it merges with
two other similar banks, operated healthily in the past 24
months, has a capital adequacy ratio of no less than 10 percent
and has prepared management facilities necessary for foreign
exchange operations.

Meanwhile, foreign exchange banks, including joint ventures,
which are already operating, should now adjust their capital
adequacy ratios.

Foreign exchange banks with a paid-up capital of no less than
Rp 150 billion should have a minimum capital adequacy ratio of
nine percent after two years, 10 percent after four years and 12
percent after six years.

Similar requirements must also be met by foreign exchange
banks which have a paid-up capital of less than Rp 150 billion
and have merged with other foreign exchange banks or non-foreign
exchange banks.

After six years, all foreign exchange banks must have a
minimum capital adequacy ratio of 12 percent and a paid-up
capital of Rp 150 billion. (pwn)