Publicly listed Bank Bukopin is inching closer to solving its liquidity problem amid reports that customers are facing difficulties withdrawing their funds, sparking concerns over the bank’s health.The Financial Services Authority (OJK) said in a statement on Tuesday that it had approved the shareholders’ plan to inject more capital through a rights issue after a series of leaked documents exposed commotion among Bukopin’s shareholders. The plan was actually approved during a shareholders meeting on Oct. 24, 2019.“We support Bank Bukopin’s corporate action to restore its customers’ and the public’s trust, especially regarding the bank’s services in the future,” the OJK said in the statement. How it all startedIn June, media outlets reported that Bank Bukopin’s customers were seen lining up for hours just to withdraw or transfer money at the bank’s branch offices. Other customers took to social media to complain that they could not withdraw money from their accounts.It was later revealed that the bank was limiting daily withdrawals and requiring customers seeking to make withdrawals of more than Rp 10 million (US$692.98) to contact the bank two days prior.Bank Bukopin later issued a statement, explaining the withdrawal limits at several branches were “situational” so that the bank could still allow customers to make transactions.“This is an adjustment that we need to make and management will continue to inform our customers,” the bank said in a statement to the Indonesia Stock Exchange (IDX) on June 25.The measure was taken because the bank’s consolidated short-term liquidity coverage, known as the liquidity coverage ratio (LCR), stood at 112.03 percent in the first three months of the year, while its consolidated long-term liquidity coverage, known as the net stable funding rate (NSFR), stood at 100.31 percent.Both figures were nearing the OJK’s minimum threshold of 100 percent.However, the OJK has since lowered the threshold to 85 percent for BUKU III category banks — banks with core capital between Rp 5 trillion to Rp 30 trillion, such as Bukopin — to stimulate the banking industry amid the COVID-19 pandemic.Meanwhile, the bank’s loan-to-deposit ratio (LDR) stood at 90.92 percent in the first quarter of this year, below the 92 percent maximum threshold set by Bank Indonesia (BI). The figure, however, was significantly higher than the 85.1 percent recorded in the first quarter of last year.This situation triggered panic among some customers, with many rushing to take their money out of the ailing bank.Shareholder commotionThe bank’s alarming liquidity condition could have been resolved long before a withdrawal limitation needed to be imposed, as the bank had received shareholder approval for its rights issue plan last year.However, a letter issued on June 10 by the OJK to conglomerate PT Bosowa Corporindo revealed that the company, founded by tycoon and politician Aksa Mahmud, was obstructing Kookmin from injecting capital into Bukopin, which would make it the controlling shareholder of Bank Bukopin.There was no controlling shareholder in Bukopin at the time, as the major shareholders, Bosowa and Kookmin, held only 23.34 percent and 22 percent stakes, respectively. Meanwhile, the Indonesian government owned a 8.92 percent stake and the public held 45.69 percent.In the letter, the authority advised the company to prioritize the public and customers’ interests. It also warned that the company could face criminal charges if it failed to do so.The OJK issued again a warning letter dated June 26 to Bosowa president director Sadikin Aksa, instructing the conglomerate to support Kookmin Bank’s plan to become the controlling investor and shareholder in Bukopin and solve its liquidity issues, Kontan.co.id reported.“We are assessing the legal aspect of a plan to increase Kookmin’s stake,” Bosowa president commissioner Erwin Aksa said, as quoted by Kontan.co.id on June 27.Given the commotion, the OJK then asked state-owned Bank Negara Indonesia (BNI) and Bank Rakyat Indonesia (BRI) to provide “technical assistance” to Bank Bukopin to help solve its liquidity issues. It also allowed BRI to help select the bank’s board of directors, according to an OJK letter, which was not confirmed nor denied by the authority.Rights issueLater in June, Bosowa and Kookmin announced a commitment to exercise their rights to conduct a rights issue. Kookmin also said it would act as a standby buyer to absorb the unexercised rights.Kookmin has deposited $200 million in Bank Bukopin’s escrow account, while Bosowa has also deposited Rp 239 billion, according to the company’s letter to the OJK.The bank will now issue 4.66 billion new B-class shares, equal to 40 percent of its current total shares, for Rp 180 apiece starting July 13. Stocks in Bukopin, traded under the code BBKP at the IDX, were priced at Rp 185 as of 1:32 p.m. Jakarta time on Friday, up 0.5 percent from the previous closing.Should other minority shareholders not exercise their rights, Kookmin’s ownership of the bank would rise to 37.6 percent from 22 percent, while Bosowa’s ownership would rise to 23.36 percent from 23.34 percent.Despite the commitment from the majority of shareholders and support from the regulator to solve the bank’s liquidity problems, Bank Bukopin appears to have lost the trust of many customers after the difficulties they faced making withdrawals.Center of Reform on Economics (Core) Indonesia economist Piter Abdullah said on Thursday the customers’ behavior could be considered a rush, and said it was unlikely to be seen among customers of other banks.“However, the problem that Bank Bukopin faces could result in customers losing trust in the bank itself,” he said during a webinar organized by Infobank.Speaking to The Jakarta Post, banking expert Paul Sutaryono said that to prevent a rush the OJK and the Deposit Insurance Corporation (LPS) needed to reassure the public that their savings were safe. “If the OJK and [Bukopin] management are transparent and give the public a sense of certainty, customers may calm down and this will prevent […] a systemic impact on the industry,” Institute for Development of Economics and Finance (Indef) economist Bhima Yudhistira said.Topics : The approval also paved the way for South Korea’s KB Kookmin Bank to become Bank Bukopin’s controlling shareholder.“We are grateful for the shareholders’ and the regulators’ support since the start of this capital injection process,”Bukopin president director Rivan Purwantono said in the statement.Bukopin has faced problems at a time when the country’s banking industry is experiencing slumping loan growth due to cooling economic activity during the COVID-19 pandemic.Loan disbursement grew 5.7 percent annually in April, slowing from 7.9 percent in March, Bank Indonesia (BI) data show. At the same time, third party funding expanded 8.08 percent year-on-year (yoy), also cooling from 9.54 percent annual growth in March.