Two more banks closed by govt
JAKARTA (JP): The government moved on Friday to close down two joint-venture banks and take over Bank Niaga in its final round of restructuring measures for the ailing banking industry.
Bank Indonesia Governor Sjahril Sabirin said on Friday joint- venture Bank Indovest and Bank LTCB Central Asia would be closed down because their owners failed to recapitalize the banks by the April 21 deadline.
"Shareholders of Bank Indovest failed to put up additional capital to meet the minimum 4 percent capital adequacy ratio, so it has to be closed down," he said.
Under the country's bank recapitalization program, designed to lift banks capital adequacy ratio (CAR) to the minimum 4 percent level, joint-venture banks are not entitled to any government funding facility, unlike domestic private banks which receive up to 80 percent of their recapitalization funding requirement from the government.
CAR is the ratio between equity capital and risk-weighted assets.
Sjahril said based on the 1998 due diligence audit, out of 32 joint-venture banks in the country, 15 banks posted a CAR level equal or more than 4 percent, and 17 banks had a CAR level below 4 percent.
He said only Bank Indovest and Bank LTCB had failed to meet the recapitalization requirements.
Publicly listed Bank Indovest is a joint-venture between state-owned Bank Dagang Negara (51 percent), Japan's Bank of Tokyo Mitsubishi (18.14 percent), Nikko Merchant Bank (17.43 percent) and the public (13.43 percent).
Bank LTCB is a joint-venture between Japanese Long Term Credit Bank (75 percent) and Bank Central Asia (25 percent).
On March 13, the government undertook major bank measures: 38 banks were closed down, seven taken over and nine private banks were to be recapitalized.
The 38 banks did not qualify to join the government bank recapitalization program, while the other seven banks were scheduled for takeovers because of their importance to the industry and the cost factor involved in closures.
The government set April 21 as the deadline for all remaining banks to meet the recapitalization requirements.
The nine private banks joining the government recapitalization program have to provide their 20 percent recapitalization funding portion in cash, but joint-venture banks have to provide the full recapitalization funding without government help.
Banks not requiring recapitalization, because their CAR level was above or equal to the minimum 4 percent level based on the 1998 due diligence audit, had to submit business plans.
Reshuffle
Sjahril said the central bank would ask some of the 74 banks not requiring recapitalization to implement a major reshuffle in management and ownership, because some of their shareholders and members of their board of commissioners and directors failed to pass the "fit and proper test".
He declined to provide further details.
"The important thing is that we already have the list of people who should be blacklisted from the banking industry."
Sjahril said the government decided to take over Bank Niaga, which had originally qualified for the government-sponsored recapitalization program, because the owners had declined to provide the 20 percent funding requirement by the April 21 deadline.
He said several foreign investors were still in the negotiation process with Bank Niaga shareholders to provide the 20 percent recapitalization funding requirement.
He said Bank Niaga was having difficulties providing the 20 percent funding requirement because the bank lacked a majority shareholder.
"Because Bank Niaga is a big bank with a good reputation, we will take over the bank temporarily to allow the bank to negotiate with would-be investors."
"I'm confident that foreign investors will participate in the recapitalization of the bank," he said, drawing attention to Thursday's landmark deal made by the U.K.-based Standard Chartered Bank, which injected US$56 million into the publicly listed Bank Bali to finance its recapitalization requirement.
Bank Niaga said on Thursday it had backed off, because it disagreed on the terms and conditions of the recapitalization program.
Bank Niaga and Bank Bali are among nine private banks to be recapitalized. The other banks are publicly listed Bank Lippo, Bank Internasional Indonesia, Bank Universal, non-listed Bank Bukopin, Bank Artha Media, Bank Prima Express and Bank Patriot.
Sjahril said except for Bank Niaga, all eight banks had deposited their recapitalization funding requirement.
But he said the banks might have to provide more funds, as the recapitalization funding needs might have increased over the past four months.
Sjahril said according to the 1998 due diligence audit, the nine banks as of December needed Rp 21.3 trillion to bring their CAR level up to the 4 percent minimum level.
"We are still conducting a reaudit on the nine banks, but the funding requirement may be larger."
Analyst said the funding requirement would most likely be larger, because the negative interest rate spread has continued to eat up capital since January.
Sjahril said any additional funding requirements would be first offered to the bank owners or other investors to fulfill before the government assumed the additional costs.
The government is planning to issue about Rp 300 trillion in bonds to finance the bank recapitalization program. The government will fully finance recapitalization of the seven state banks, 27 provincial development banks and 12 banks which have been taken over, including Bank Niaga.
The bonds are expected to carry two types of interest rates -- a market rate and a fixed rate. (rei)