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Bank Indonesia to decide fate of two banks Tuesday

JAKARTA: Bank Indonesia said two private banks had a capital adequacy ratio below the required level of four percent and their fate would be discussed by the central bank on Tuesday.

"This will be discussed with Bank Indonesia's board of governors tomorrow. But they are both small banks," Bank Indonesia Deputy Governor Subarjo Joyosumarto told Indonesia's SCTV television station in an interview on Monday. The next possible step would be for the Indonesian Bank Restructuring Agency (IBRA) to take over the banks first, sell their good assets, then freeze their remaining operations, Subarjo said.

But Subarjo said this did not mean the banks were going to be liquidated.

"Let's not jump to a conclusion that the banks will be liquidated," he said.

"Logically, if the owners could not inject more capital and no investors seem to be interested in the banks, then the alternative is for IBRA to take over the banks, sell their good assets and close or freeze the operations."

He declined to mention the name of the two banks.

Under government regulations, all banks were to have at least a four percent capital adequacy ratio, measured by comparing capital to the risk-weighted assets, by end-1999.-Reuters