More foreigners to manage local banks

JAKARTA (JP): Bank Indonesia (BI) is considering allowing more foreign bankers to manage local banks in a bid to rebuild confidence in the ailing industry, according to an official source.

The source, who asked for anonymity, said that expatriates would be allowed to manage local banks even though the banks had no foreign shareholders.

"The central bank is considering such a measure," the source said.

A Bank Indonesia ruling still in effect allows a foreign banker to manage a local bank only if the bank is partly owned by foreigners.

"You have to understand the spirit of the new ruling, which is designed to rebuild confidence in the banking sector and attract more foreign capital," the source explained.

"The essence of banking business is confidence," he added.

The source said that an experienced foreign banker hired by a local bank could have a positive multiplier effect on the bank.

Publicly listed Bank Lippo announced recently that it had appointed Ian B. Clyne as the bank's president and CEO. Clyne, a 44-year-old Australian, has had a long career with top overseas banks including ING Barings, Banque Indosuez, and Australian banking industry.

Bank Lippo is one of a few banks in the country that have been recapitalized with government sponsorship.

Publicly listed Bank Danamon was the first to appoint a foreign president. In a March 30 extraordinary shareholders meeting, Milan Robert Shuster was named the bank's new president.

Bank Danamon is 99 percent owned by the Indonesian Bank Restructuring Agency (IBRA), which took over the bank last year after its owner, Usman Admadjaja, failed to repay debts to the government and the bank breached the legal lending limit requirement by channeling most of its money to businesses owned by Usman.

It is not clear whether foreigners hold stakes in the bank.

But press reports said the head of banking supervision at Bank Indonesia, Maulana Ibrahim, had sent a letter to IBRA on June 18 rejecting the recent appointment of several of Bank Danamon's new directors, including Shuster.

Bank Indonesia and IBRA officials were not available for comment.

But the source said the appointment of Shuster should not become an issue for debate because he has the capability to help rebuild Bank Danamon.

"I think we should allow expatriates to lead our banks at least until the crisis is over," the source said.

IBRA is planning to inject eight smaller nationalized banks into Bank Danamon to create one of the country's core banks.

The current economic crisis has sent most of the country's banking institutions to the brink of collapse as both depositors, and local and overseas investors have lost confidence.

The government-sponsored bank restructuring program has resulted in 66 banks being closed down -- out of a population of more than 200 -- and 11 banks nationalized.

The government is planning to issue over Rp 351 trillion worth of bonds to finance the recapitalization program of surviving banks.

Bank Indonesia director Subarjo Joyosumarto also said recently that a third of the 73 private banks which did not need recapitalization had managers or owners who did not pass the central bank's "fit and proper" criteria.

Subarjo said that they had to be replaced.

Most of the banks are not publicly listed and have no foreign owners.

Several foreigners have already started helping local banks, including state banks, to sort out their messy conditions, particularly the huge amount of problem loans.

State-owned Bank Negara Indonesia (BNI) was reported to have clinched a deal with Germany's Commerze Bank to help resolve its Rp 14.4 trillion non-performing loans (NPLs).

Leading foreign consultants are also helping state banks to restructure their operations and NPLs.

Foreign investors are expected to acquire more local banks in the near future, after the UK-based Standard Chartered Bank acquired a 20 percent stake in Bank Bali, and savvy financier George Soros was reported to have acquired Bank CIC. (rei)