Beleaguered Bank Indonesia Ready to Face the Music

JAKARTA -- Attacked from every corner over the Bank Century debacle, Bank Indonesia says it will welcome an investigation and allow law enforcers to arrest any official found to have abused their power in the Rp 6.76 trillion (US$676 million) bailout.

The statement comes in response to a call by the House of Representatives urging law enforcers to investigate allegations of violations by officials at the Financial System Stability Committee (KSSK) - which comprises the central bank, the Finance Ministry and the Deposit Insurance Corporation (LPS).

The House also urged the Supreme Audit Agency (BPK) to finish its ongoing audit of the Century bailout immediately, to track where the money had been channeled.

"We will be glad once the BPK audit is done and we can see where the money went, so the public's suspicions can be answered," BI deputy governor Budi Rochadi said Thursday.

"If any BI officials are found to have *misbehaved', then they must be arrested."

Budi's response echoes statements made earlier by Finance Minister Sri Mulyani, who chaired the KSSK when deciding to bail out Century.

The House questioned why the bailout, initially estimated at Rp 632 billion, had swelled to Rp 6.76 trillion.

During the KSSK meeting on Nov. 21 last year, Budi said, the central bank had said the Rp 632 billion was its estimate for the amount needed to raise Century's capital adequacy ratio (CAR) to 8 percent, while an addition of Rp 4.7 trillion was needed to serve as a liquidity buffer in the case of a bank run.

Even if the KSSK had decided not to rescue the bank and let it fold, Budi went on, the government would have spent Rp 6.4 trillion to cover the deposits under the deposit guarantee scheme.

The scheme guarantees all deposits under Rp 2 billion in one single account.

Five banks of a similar size to Century, as well as 18 others, might have been affected if Century had collapsed, thus creating a systemic threat, Budi added.

The BPK expects to finish its final audit on Century on Oct. 19, when BPK chairman Anwar Nasution will end his term.

Anwar said BI's weak supervision had led to the rescue measure, after poor management by Century's owners - Robert Tantular, UK national Rafat Ali Rivsi and Saudi Arabia's Hesyam Al Warraq - caused the bank to collapse due to bad loans and dubious securities.

Tantular has been jailed for four years by the Central Jakarta District Court, while Ali Rivsi and Al Warraq remain at large.

Century was established in 2004 from the merger of three troubled banks - Danpac, Pikko and CIC - after Anwar, a BI deputy governor at the time, considered it would be easier to oversee one bank, despite Pikko owning rotten loans and CIC owning junk bonds, said Heru Kristiyana, deputy director of banking supervision at BI.

by: JakartaPost