Bank Indonesia deputy governor Subarjo Djojosumarto said in a media conference that Bank Putera had a capital adequacy ratio (CAR) of minus 48.15 percent -- far below the minimum 4 percent requirement.

"Based on the result of an independent audit, the bank has a negative CAR of minus 48.15 percent and nonperforming loans of more than 80 percent," Subarjo said.

He also said all obligations of the bank would be guaranteed by the government.

He said the depositors' money would be paid via Bank Central Asia (BCA).

The central bank put Bank Putera under the supervision of the Indonesian Bank Restructuring Agency (IBRA) on Dec. 10 after the bank's owner failed to raise funds to settle the bank's negative account at Bank Indonesia.

Bank Putera's clearing activities were suspended by the central bank on Dec. 7 after it suffered a negative balance with Bank Indonesia amounting to Rp 278.5 billion (US$38 million) following a run on the bank.

The run amounted to Rp 592.3 billion, which dried up its reserves at the central bank and put its account at Bank Indonesia in negative territory.

The run on the bank was prompted by reports that it would be taken over by IBRA in the wake of the revelation of a multimillion dollar loan scandal involving the bank's owner, Texmaco Group.

But the central bank allowed the bank to resume clearing activities last week, after IBRA provided a temporary loan to settle its negative account at Bank Indonesia.

Bank Putera has total assets of Rp 3 trillion. Its third party funds amounted to Rp 413 billion, while credit to its affiliated group reached 69.33 percent of its total lending of Rp 1.3 trillion.

Subarjo said that the central bank was still checking on three other banks which had just recently injected funds to improve their capital level.

He said that the central bank was making sure that the money did not come from loans or "money laundering".

Under the agreement with the International Monetary Fund, Bank Indonesia asked owners of banks whose CAR falls below 4 percent to raise the capital to that level by Jan. 20, otherwise corrective actions would be taken against those failing to comply with the requirement. (rei)

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The bank said in a statement the loan package was originally approved on May 18 last year, but was delayed due to technical issues and the emergence of the high-profile multimillion dollar Bank Bali scandal.

"The release of these funds had been stalled, but a new agreement with the International Monetary Fund (IMF) and progress on the resolution of the Bank Bali case have enabled this disbursement to proceed," the World Bank said.

The government and Bank Indonesia signed a new Letter of Intent with the IMF last week that resumed the disbursement of a multibillion dollar loan package which was suspended in September following the disclosure of the Bank Bali scandal, which tainted then president B.J. Habibie's administration.

World Bank country director Mark Baird said the disbursement of the bank's program loans for Indonesia was "a clear signal of international support for the government as it puts in place its new economic recovery program".

Baird said the World Bank needed to help finance Indonesia's social safety net programs in a bid to reduce the number of impoverished people in the country, which increased precipitously during the economic crisis.

"This release does not mean things are perfect in these programs -- we do not expect problems to disappear overnight," he said. "Implementation so that the programs reach the poor effectively is our focus now and will be key to our continued support."

According to World Bank data, poverty in Indonesia fell below the 20 percent level to 19.34 percent as of August 1999, compared to its peak of 20.47 percent in February of the same year.

The bank, however, cautioned that it would take more than five years for the poverty rate to return to its precrisis level of about 11 percent.

Nevertheless, Baird said the World Bank, along with other donors, was committed to helping Indonesia reduce poverty through long-term programs and by maintaining the momentum of the economic recovery.

"We will continue to work with the rest of the donor community in the months ahead to support the government's objectives of economic recovery, good governance and social protection, which includes the transition from social safety nets to long-term poverty reduction programs," Baird said.

In its report prepared for the Consultative Group on Indonesia meeting here next week, the World Bank said Indonesia would need between $4.2 billion and $4.7 billion in new loans to help finance its budget deficit in 2000.

The government presented its 2000 draft budget to the House of Representatives last week, in which it foresaw a deficit of up to 5 percent of the country's gross domestic product (GDP).

The World Bank said in its report that the government's debt had increased from 23 percent of GDP before the crisis in March 1997 to about 90 percent of GDP currently.

The report, however, praised the country for having a popular government with strong legitimacy on top of stable macroeconomic indicators and strong oil prices.

It added that inflation had been greatly slowed, the rupiah was within a narrow range, interest rates had fallen to precrisis levels and the country's risk continued to decline.

The report also said sustainable economic recovery in the country would be difficult, but not impossible.

"The economy is recovering gradually and tentatively through its own internal recuperative powers. For this to be sustained, will be difficult but not impossible."

Above all, peace and the assurance of political stability were most important, as foreign investors' confidence would not return without them, it said. (udi)

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