[Kabar-indonesia] Banking Industry Needs Strong Medicine: BI [+BNI Seeks US$150m Loan]

[JoyoNews at aol.com]

also: JP: BNI seeks US$150m syndicated loan 

The Jakarta Post 
Monday, October 2, 2006

Banking Industry Needs Strong Medicine: BI 

The Jakarta Post, Jakarta

Complying with the Basel II international best banking practices on minimum 
capital requirements and risk management is the strong medicine the industry 
needs to take if the system is to gain soundness, the central bank says.

Bank Indonesia said compliance would mean lenders might notice a short-term 
decline in capital adequacy ratios (CAR) and their ability to provide more 
loans. However, banks could manage the situation and in the long-term would become 
more prudent in their channeling of loans, the bank said. 

"Banks whose credit portfolios mostly consist of corporate loans, and who 
have 'low-quality' loans, may experience a drop in their CAR," Bank Indonesia 
(BI) analyst Wimboh Santoso said last week after explaining the central bank's 
latest plan to implement the Basel II accord. 

Lenders with portfolios comprising retail, consumer and business loans, and 
home mortgages -- all of which carry lesser risk -- would likely remain 
unaffected in terms of their CAR, Wimboh said. 

A bank's CAR is the ratio between its capital and risk-weighted assets, 
including loans -- the higher the CAR, the better the bank's ability to cover risks 
without affecting its financial soundness. 

BI currently sets a minimum 8 percent CAR for all lenders, in line with the 
accord. 

BI director for banking regulations Muliaman D. Hadad earlier claimed that 
implementing the Basel II accord would pose no difficulties for lenders as the 
industry's average CAR currently stood at 21.5 percent -- far above the 8 
percent minimum requirement. 

However, Wimboh did not say to what extent the implementation of the accord 
would affect the CAR of lenders in the country. 

He said banks would likely benefit from the accord because it encouraged 
banks to limit credit risks by requesting more collateral for loans. 

The central bank is requiring all lenders to comply with the Basel II accord 
by 2008 and has recently established a monitoring committee to oversee the 
compliance. 

The Basel II accord is part of BI's Indonesian Banking Architecture (API), a 
blueprint to consolidate and strengthen the industry by 2010. The central bank 
is expected to announce a package of banking policies soon, including 
relaxing the legal lending limit currently applied on the industry. 

The accord sets out international guidelines formulated by the Swiss-based 
Basel Committee on Banking Supervision, a grouping of 13 central banks of major 
industrial countries, for assessing the capital adequacy of a bank. 

The 2004 update of the original 1988 version, or Basel I, incorporates the 
related principles of banking transparency, credit management, and operational 
and market risks. 

It is supposed to be implemented in 2008 by the around 100 countries that 
have already implemented Basel I, including European Union nations. The U.S., 
meanwhile, will give a three-year grace period to smaller lenders. 

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The Jakarta Post 
Monday, October 2, 2006

BNI seeks US$150m syndicated loan 

JAKARTA: State Bank Negara Indonesia (BNI) has appointed three foreign banks, 
Standard Chartered Bank, Mizuho and ABN-Amro, to help it secure US$150 
million in syndicated loans.

The loan is a strategic way of financing, and will be used to finance the 
operations of is foreign branches, BNI corporate secretary Intan Abdams Katoppo 
said in a report to the Jakarta Stock Exchange on Saturday. 

The syndicated loan will mature in two to three years. -- JP 

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Joyo Indonesia News Service
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