S

tate insurance company PT Jamsostek is negotiating with four state banks over a move to help strengthen their capital reserves amid the global economic downturn, the company's top executive says.

President director Hotbonar Sinaga said Tuesday if deemed beneficial, the company would convert its massive cash deposits in the four banks into subordinated debt.

Such debt, also known as subdebt, is unsecured debt with a shorter maturity period, but with higher yields.

"We are currently negotiating about the terms and condition of the (subdebt) deals, we hope it will be a win-win solution," said Hotbonar.

He said Jamsostek had studied this plan, and decided to follow it up with separate negotiations with the requesting banks; Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Negara Indonesia (BNI) and Bank Tabungan Negara (BTN).

"From our (management risk) calculation, the interest rates should be higher than those of either bonds or deposits," he said, without details.

Interest rates for bank deposits and bonds currently stand at between 9 percent and 14 percent.

According to Hotbonar Jamsostek has total cash deposits of Rp 20 trillion (US$1.94 billion), with half deposited in the four banks.

The company, which has investable funds worth Rp 72.7 trillion this year, has Rp 3 trillion in BRI, Rp 3 trillion in BNI, Rp 2 trillion in Bank Mandiri, and Rp 2 trillion in BTN.

Hotbonar explained the plan was part of the government's precautionary moves to help the state banks cope with current conditions. "Who said that *the bank's financial condition would remain solid*? They *the banks* will need additional capital amid this difficult situation, and this subdebt is one of the solutions."

BRI president director Sofyan Basyir said the bank was aiming to get more than Rp 1 trillion in additional working capital reserves from subdebt facilities for its loan expansion this year. He refused to say whether the bank would receive it from Jamsostek.