March 12, 1999
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| March 12, 1999 | atimes.com | |
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| Southeast Asia Impending liquidation sparks run on banks in Indonesia JAKARTA - Large withdrawals of funds from private banks, as the country's restructuring approaches and some banks face liquidation, have forced the government to inject more fresh funds in the form of Bank Indonesia liquidity assistance (BLBI) to private banks under the control of the Indonesian Banking Restructuring Agency (IBRA). Data indicated that within a week the total amount of net claim of the central bank on IBRA rose to Rp 7.013 trillion ($935.07 million) from the previous week's figure of Rp 5.984 trillion ($797.87 million). Meanwhile, details of the country's banking restructuring exercise are to be announced this week by the central bank, Bank Indonesia (BI). The exercise will include the categorization of banks, with some expected to close operations, BI managing director Miranda Goeltom told visiting Asean journalists here. She said that banks would be placed under three categories. Banks under category A are those with a capital adequacy ratio (CAR) of below 4.0 percent and could continue their operations, while banks with a CAR level of between negative 25 (-25 percent) and 4.0 percent would be recapitalized as long as they have their business plan submitted to BI, she said. Under category C, the central bank would revoke the operating licences of banks which have CAR of less than -25 percent. However, since January this year, BI has provided a grace period for banks with -25 percent CAR to add capital into their operations so they could be placed under the B category. ''We will announce this week which bank is to be included under the A category, where the government does not have to spend on them and they can start moving and start lending,'' Goeltom said, adding that the B banks would be recapitalized and that C would be liquidated. She said there was a need to undertake the exercise in order to cut the cost of recapitalization involving 166 banks in Indonesia. The whole recapitalisation process is to involve an estimated rupiah 300-400 trillion or about $30 billion to $40 billion, on private-owned and state-owned banks. She acknowledged that the government had yet to decide on how to finance the exercise. ''We have not decided. But there is an idea of making use of the huge pension fund and foreign fund,'' Goeltom said. Regarding state banks, she said the government would recapitalize three banks - Bank Negara Indonesia, Bank Tabungan Negara and Bank Rakyat Indonesia. Another four state-owned banks - Bank Bumi Dayak, Bank Dagang Negara, Bank Pembangunan Indonesia and Expot-Impot Bank (Exim) - would be put under self-reliance, including mergers. The recapitalization of the state banks is planned to be concluded by March 2000. Besides the banking restructuring exercise, the Indonesian government is also in the midst of preparing a draft to separate BI and the Ministry of Finance. Goeltom said the draft on the Central Bank Act would be approved at the end of this month and would be enacted next month. Under the new Banking Act, BI will run independently to supervise financial institutions in the country. The banking crisis in Indonesia had caused the country's inflation rate to soar to 17.6 percent in 1998 and the effort now is to contain it below the 20 percent level. (Compiled from Asia Pulse/Bernama dispatches) | |||||||||
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