Aditya Wikrama & Ardian Wibisono

Jamsostek Wants Deal on Sub-Debt

State pension fund PT Jamsostek is demanding premium interest rates from state banks before converting pension-fund assets now in time deposits into riskier subordinated-debt holdings.

Jamsostek president director Hotbonar Sinaga said on Wednesday that the interest rate on the sub-debt would need to be at least 1 percent higher than the time-deposit preferential rate, which is now about 10 percent.

The government has asked state pension and insurance providers to convert funds deposited in state banks into sub-debt holdings in a move to raise banks’ capital-adequacy ratios.

Sub-debt entails both higher risks and returns. If the issuer fails, secured creditors will be repaid first and unsecured creditors — of sub-debt — could miss out.

Jamsostek manages Rp 72 trillion ($7.1 billion) in funds, including about Rp 21 trillion, or 30 percent, in time deposits.

Hotbonar said Jamsostek was willing to convert 25 percent to 50 percent of that Rp 21 trillion into sub-debt issued by state banks. He said the company was in talks with PT Bank Rakyat Indonesia and PT Bank Negara Indonesia.

“As long as the state banks offer an interest rate that is one or 2 percent above the market rate, we could accept it,” he said.

He added that Jamsostek’s request should not be overly difficult to fulfill as the rate would still be lower than sub-debt issued by private banks.

“We will accept a lower interest rate from state banks compared with private banks as state banks entail less risk. They also enjoy strong liquidity,” he said.

BRI finance director Abdul Salam said the bank would consider Jamsostek’s request. However, he said now was not the ideal time as interest rates were falling and likely bottom out later this year.

BRI had previously said it was interested in issuing up to Rp 2 trillion of sub-debt. It has since appointed three securities companies as underwriters.

Gatot Suwondo, BNI’s president director, said last week that BNI was interested in the sub-debt option, but also cited falling interest rates as a concern, saying the bank would prefer to wait since it currently had enough capital and liquidity.

“As interest rates continue to decline, we don’t want to get caught with long-term high-interest rates,” he said.

BNI had originally said it would be interested in selling up to $300 million in sub-debt.

The latest figures from Bank Indonesia show that the average capital-adequacy ratio of state banks at the end of May stood at 14.57 percent, compared with 15.7 percent at the end of January.

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