No plans to close down any banks this month: BI

JAKARTA (JP): Bank Indonesia has no plans to close down any banks this month because owners of private banks with insufficient capital have already recapitalized the banks, according to BI Governor Sjahril Sabirin.

Sjahril said on Monday that there were only two remaining banks with a capital adequacy ratio (CAR) below the minimum 4 percent requirement.

CAR is the ratio between capital and risk-weighted assets.

"Most have increased their capital. Only one or two haven't. We're still waiting for them to increase the capital," he told reporters on the sidelines of a meeting with senior economics ministers.

Sjahril added that closing down banks would be the last resort.

"It's the last resort. Let's hope there will be no more liquidations," he said.

Bank Indonesia senior deputy governor Anwar Nasution recently warned banks with a CAR below 4 percent that they risked closure if they failed to improve their capital level by the end of this month.

Anwar was referring to "A category" banks which survived the banking crisis in 1998. There are 74 banks in this category.

Bank Indonesia deputy governor Subarjo Joyosumarto said late last year that some eight of the A category banks had CARs below 4 percent.

The government has closed down 66 banks and nationalized 13 banks since the financial crisis started in the middle of 1997.

The government has also sponsored the recapitalization of seven major private banks.

A category banks escaped the ax because their CAR was above 4 percent.

But as the problem of negative spread persisted last year, the capital of domestic banks continued to deteriorate.

Anwar had said that the government would no longer provide financial assistance to recapitalize the remaining A category banks because the government did not have the financial resources.

Meanwhile, Bank Indonesia said in a statement late Monday that it had issued a regulation on "fit and proper test" of bank owners and managers in a bid to help create a strong and efficient banking system.

The bank said the fit and proper test would cover the integrity and competency of bankers.

Bank Indonesia has said that bank owners and executives with integrity are those who have never breached banking regulations, have never been involved in activities which benefit themselves but which inflicted financial losses to the bank, or violated regulations on banking prudence.

The central bank said the competency criteria included the knowledge and the expertise of bankers.

The new regulation took effect on Jan. 14, Bank Indonesia said.

The bank added that the fit and proper test would be an ongoing activity, the results of which would not be disclosed to the public but would be used internally as a tool for banking supervision.

Separately, Supreme Audit Agency (BPK) head Satrio "Billy" Yudono said on Monday that the agency was teaming up with the Attorney General's Office to conduct an investigative audit on Bank Indonesia following its announcement of a damning audit report on the central bank.

The audit will particularly center on the central bank's disbursement of massive liquidity support to ailing banks in 1998.

Billy said the joint audit was necessary because it was possible that there were criminal violations in the channeling of Rp 164.5 trillion in liquidity support.

There has been allegations that some Rp 80 trillion of the facility was channeled improperly.

The central bank has repeatedly denied any procedural violations in the channeling of the liquidity support. (rei)