Recapitalization of banks too slow, say bankers

JAKARTA (JP): Chairwoman of the Indonesian National Private Banks Association (Perbanas) Gunarni Soeworo said Saturday that the country's bank recapitalization program was progressing too slow.

Gunarni, also president of Bank Niaga, urged the government to go ahead with the plan because further delays would only ruin the already weak banking sector.

"The recapitalization program is progressing too slow. Time is very valuable here. The more it is delayed the more costly it will be," she told reporters after attending a post-Idul Fitri gathering hosted by the Finance Journalists Club.

The bank recapitalization program has been widely criticized, and this has partly caused the delays in the planning, which according to the government schedule, should have been completed by the end of last year.

The House of Representatives demanded Minister of Finance Bambang Subianto last week to either revoke, delay, or revise a controversial government decree including privately run Lippo Bank and Bank Sembada Artanugroho (Sanho Bank) with 10 provincial development banks in the first batch of banks to be recapitalized by the government.

The decree stipulates that Lippo Bank would take Rp 3.75 trillion of the Rp 4.29 trillion earmarked for the first stage of the recapitalization scheme, to bring the bank's capital adequacy ratio (CAR) to the minimum level of 4 percent.

The House lambasted the program, claiming the finance minister had broken his earlier promise that the government would first recapitalize only the provincial development banks and the country's seven state banks.

Some legislators have smelled a rat in the plans, as Lippo would receive the lion's share of the recapitalization funding. They said that this is highly questionable due to the cozy relations between Lippo's owners, the Riady family, and President B.J. Habibie.

The government has insisted that the two private banks were included because they had met the necessary requirements to join the recapitalization program, while the state banks and the other provincial development banks had yet to complete their working plans, including cleaning up huge non-performing loans.

The government also said Lippo would receive the largest amount because it was the biggest in the first group of banks.

Under the government bank recapitalization program, 80 percent of funding will be provided by the government by issuing bonds, while the remaining 20 percent has to be provided by the banks. The recapitalization program is expected to cost between US$35-40 billion.

"We have been informed that Lippo has met the necessary requirements. So I don't see why I have to be suspicious about the decree," Gunarni said.

"The faster the bank is recapitalized, the better it is. We badly need healthy banks to help revive the ailing real sector," she added.

"So whichever banks are ready, the government has to immediately recapitalize them," she said.

"We must not waste more time on unconstructive matters," said secretary-general of Perbanas, Wibowo Ngaserin.

"Even if we implement the recapitalization program the (economic) situation may not immediately improve due to the political and social conditions. So we must move fast, and stop making a fuss when can we start rebuilding the economy," he added.

He urged the government not to discriminate between state banks and private banks in the recapitalization scheme.

President of privately run Bank IFI Harry Rachmadi said it would be ridiculous if the recapitalization of eligible private banks was delayed because the state banks had yet to complete the requirements.

"If the government has to wait for the state banks, the recapitalization process will take a longer time, which will be bad for the real sector," he pointed out.

Gunarni said the furor over the recapitalization program resulted from poor communication between the government and the public.

"We must all understand that the recapitalization program is critical for the country," she said.

"I think they (the House) understand the importance of the recapitalization program, but they failed to understand the importance of the time dimension," she added.

She explained that the recapitalization program was just an initial link in the long chain of restructuring and cleaning up the country's 200 commercial banks.

"There are many other steps that have to be taken. Settling the huge non-performing loans is the most crucial," she said.

Bambang told the legislature last week that the recapitalization program was expected to be completed by the end of March.

He said that banks which failed to qualify for the program would be closed down. (rei)