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Banking and Finance
The Bank Century Takeover
Century is the first bank to be under BI's special watch since financial crisis starts.
Jum'at, 21 November 2008, 19:27 WIB
Ramona Sofianne Dewi, Archie Ardian 
Maryono, Boediono, Rudjito (Andika Wahyu)
VIVAnews - Finance Minister Sri Mulyani held a meeting late last night that perhaps lasted well into dawn. At the time it wasn't clear what the meeting was about, but judging by the people who attended, it did not seem like a regular meeting.
From the Department of Finance, there were officials such as the General Director for Credit Management, Rahmat Wahlujanto and the General Director of Taxation, Darmin Nasution.
There were also officials from Indonesia’s central bank, Bank Indonesia, the Senior Deputy Governor Miranda Goeltom, and Deputy Governors, Siti Chalimah Fadrijah, Muliaman Hadad, and Budi Mulia.
The meeting was also attended by Head of Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK), Fuad Rahmany and the Chief Executive for Savings Guarantor Body (LPS) Firdaus Djaelani.
The unlikely attendees of the meeting were President Director of Bank Century, Hermanus Hasan Muslim, his Vice President, Hamidy, and President Director of Bank Mandiri, Agus Martowardojo.
Minister of Government-Owned Enterprises, Sofyan Djalil, also attended, but left early at midnight, when the meeting itself was still showing no signs of ending. “The meeting has just begun,” Sofyan Djalil said as he was leaving the Finance Department premises, Friday, 21 Nov.
It wasn't until around 09.00am this morning, 21 November, that the meeting's purpose was revealed. In a press conference, Bank Indonesia (BI) announced that the government, in this case the Financial Sector Stabilizer Committee, headed by Finance Minister Sri Mulyani, and members of Bank Indonesia, decided to take over Bank Century who have been having clearing problems. The takeover will be done through the LPS. The bank itself will continue its role as a foreign exchange bank and cater to its customers’ needs.
"The takeover by the government is so that the bank could improve the quality of its services to its customers and also improve Bank Century's durability,” Governor of Bank Indonesia, Boediono said at Bank Indonesia, Jakarta, today, Nov. 21.
In preparing for the takeover Bank Century was not operational for customer related services today, Friday, Nov. 21. It will resume business as usual, starting Monday, 24 November, "For a smooth takeover process, Bank Century will not cater to customer services this Friday,” Boediono added.
Several customers, who didn't know about the takeover, came to the head office of Bank Century in the Senayan area, Friday 21 Nov 2008, thinking of making transactions. "I didn't know about the takeover. I only knew about it after the customer service told me," said Andriani (50), one of several customers to be found on the bank that time. Andriani admitted that he was quite flustered when he found out that the bank's management was covering up its condition. But he was relieved to know that the government guarantees the customers savings, "I'm much calmer, but I will still try to find out about the banks condition. I will return on Monday," he said.
As for the employees of the Bank Century, Bank Indonesia hoped that they remain calm and assume their work as usual. The takeover by the LPS was to be done in such a manner that it would not disrupt conditions internally. "The employees are asked to remain working as usual and cooperate with the new management,” BI Governor Boediono said at the press conference.
Liquidity Problems
Bank Indonesia has actually noticed Bank Century's liquidity problems since 2007. This was why BI asked for the shareholders of Bank Century to add their capital. This was done by asking them to sell liquid assets, such as bonds. BI had also put the bank under intensive surveillance. “They've fulfilled that on June 2007 through the rights issue,” BI stated.
But the current global crisis made things worse for Century. "Pressures for liquidity mounted, especially since positive perceptions of the customers for Bank Century lowered” BI added.
Bank Century experienced problems in settling clearing payments on 12 November. The next day, on 13 November, again Bank Century could not provide Rp 5 billion (approx. $407,000) to the central bank clearing house. The Indonesian Stock Exchange (IDX) suspended trade in Bank Century.
The suspension was lifted on Friday, 14 November, after Bank Century explained that it was due to a technical problem that caused a delay in the prefund provision. Apparently the high volume of inflow and outflow of transactions caused the problem.
On Saturday, 15 November, the condition was calmer. However, on Sunday, 16 November, evening, PT Sinar Mas Multiartha announced that it had signed a letter of intent to acquire 70 percent of Century’s shares. This caused the IDX to again suspend trading on Century shares, and this time also Sinar Mas shares. Sinar Mas said that the acquisition is so that the bank does not collapse. The IDX lifted the suspension on both companies on Tuesday morning.
During that time BI had also asked the bank to invite strategic foreign investors, which would help to solve the bank's problems. BI had even supplied a Short-Term Refinancing Facility. But so far none of that had worked.
Then, this morning, after the meeting of the officials, Bank Indonesia held the press conference to announce that Century would be taken over by the government.
The new plan and management
Bank Century will now be headed by Maryono, a former Bank Mandiri Director. He will perform consolidations throughout the bank, in order to understand its latest condition, including its financing needs. “We don't know yet, we are taking a look at the most recent conditions, we are still consolidating,” Maryono said at the Bank Indonesia building, Jakarta, Friday, Nov. 21.
On Monday, Bank Indonesia, under the consent of the Financial Sector Stabilizer Committee (KSSK) will inject an Emergency Financing Facility (FDP) to Bank Century. But the amount is still being calculated. Though that means, according to article 27 of the Bank Indonesia regulation no 10/31/PBI/2008 on FPD, the receiving bank of this fund must be put under a status of Special Surveillance.
"Monday (the funds come in)," said the head of the Savings Guarantor Body, Rudjito to reporters at the Bank Indonesia building, Jakarta, Friday, Nov. 21. The funds itself will be given in increments. The Capital Adequacy Ratio (CAR) of Bank Century was under the 8 percent maximum limit which Bank Indonesia has set, but according to Rudjito the funds given would be able to fulfill the 8 percent minimum CAR. If on this stage the bank has stabilized and efficient, then the injection will no longer be that much.
On the appointment of Maryono as Bank Century's new top director, bankers consider it to be a correct move. Maryono as the leader of Bank Century will be able to give a sense of security to customers, especially because Maryono was the leader of a large bank. “So there will be a figure that would emanate trust,” a director of Bank Mandiri, Sentot A. Sentausa said to reporters on a discussion at Bandung, Friday, Nov. 21. Not to mention, according to Sentot, Maryono is an excellent banker, and a person who has been tested on the field. “After all, he did become the group head of Mandiri,” He added.
Bank Century is the first bank to be under BI’s special watch since the global crisis started.
VIVAnews writers Umi Kalsum, Anda Nurlaila, Nur Farida Ahniar, Heri Susanto, Hadi Suprapto, Syahid Latif contributed to this report.
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