No plans to close down any banks this month: BI

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)