Recapitalization of banks too slow, say bankers

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)