No32/10/BGub/Humas

The national banking restructurization program reached an important milestone with the completion of the steps of private bank restructurization announced today. With the completion of this round, the national banking sector has improved its health and is therefore hoped to function more effectively in supporting the national economic recovery.

This better soundness will be maintained and henceforth there is effort towards achieving international standards. For this purpose, Bank Indonesia will perform more intensive periodic examinations of all banks. With the improvement of the monetary situation and the current effort of business restructurization, this improvement in the soundness of banks is hoped to become more stable.

The steps announced today include steps taken on private banks in Category A, private banks which joined the recapitalization program, and joint venture banks.

1. As was announced on 13 March 1999 there are 74 banks in Category A, with CAR of 4% or more. From the 74 banks, there were 24 banks which originated from Category B and C. These banks were analyzed to examine two conditions, i.e.:

• The accuracy of the amount and the source of capital injections made by banks originally in Category B and C (24 banks).
• The fulfillment of Fit and Proper Test for shareholders, commissioners and directors of the 74 banks.

1. Based on the examination it was found that the twenty-four banks which originated from Category B and C have injected capital sufficiently and the capital was not from loans.
2. The examination of the fulfillment of Fit and Proper requirements was performed on shareholders, members of board of commissioners, and members of board of directors of the 74 banks. The result of the examination will be used by Bank Indonesia for the purpose of banking supervision and development, including changing bank management and owners which do not meet the Fit and Proper requirements. Thus, it is hoped that the bank will be able to increase its efficiency.

2. Banks which were Recapitalized

1. From 9 (nine) banks which joined the recapitalization program, 8 (eight) banks have met the requirement of providing 20% additional capital.
2. From the banks which joined the recapitalization program 5 (five) banks had gone public:

1. The majority shareholders of 3 (three) banks, i.e. Bank Lippo, Bank International Indonesia, and Bank Universal, performed rights issues to fulfil 20% of the additional capital requirement.
2. Bank Bali has obtained a foreign strategic partner, Standard Chartered, which injected funds to fulfil 20% of the additional capital requirement.
3. As for Bank Niaga, no majority shareholder or shareholders were able to meet the obligation of injecting 20% of the additional capital requirement. Some investors, both local and foreign, have expressed interest in fulfilling the additional capital requirement. Lately there have been discussions between these investors and Bank Niaga. Considering that Bank Niaga is a large and reputable bank, which has a wide network with a large customer base reaching 458 thousand accounts, while giving a chance for negotiations between investors, for the time being Bank Niaga is taken over by the Government.

1. The shareholders of banks which have not gone public, i.e. Bank Bukopin, Bank Artamedia, Bank Patriot, and Bank Prima Express, have provided funds for fulfilling 20% of the additional capital requirement.
2. The amount of additional capital was based on calculations of required capital in order to achieve CAR of 4% that was announced on 13 March 1999 and totaled Rp 21.3 trillion for the 9 banks.
3. The 9 banks are currently undergoing a repeat of due diligence and it is expected that the results will demonstrate a higher capital requirement. To achieve 20% of this higher additional capital requirement, fulfillment of the deficit will be offered to the banks’ shareholders or other investors. In the case that the shareholders or other investors are unable to or are unwilling to fulfil the deficit, then the Government will fulfil the capital deficit so that the bank’s CAR is maintained at 4% in June 1999.

2. Joint Venture Banks

1. As a result of due diligence, from the 32 joint venture banks in Indonesia, 15 banks fell into Category A and 17 banks fell into Category B and C. Based on the regulations, recapitalization of joint venture banks is performed by the bank shareholders, particularly their foreign shareholders.
2. Among the 17 banks in Category B and C, 15 banks have prepared funds for capital injection to achieve CAR of 4% or more, and thus become Category A banks.
3. The shareholders of one bank, i.e. Bank Indovest, were unable to provide the required recapitalization funding, so this bank will be closed down. This bank joined the Government guarantee program, and the settlement of customer accounts will be performed by its main bank, which is also its paying bank, Bank Dagang Negara.
4. One other bank, i.e. Long Term Credit Bank Central Asia (LTCBCA), had previously announced that it will close down due to the change in the main bank’s policy. Considering that the bank did not join the Government guarantee program, settlement of its obligations to customers will be done by the bank itself, with close monitoring by Bank Indonesia.

Jakarta, 23 April 1999