Indover heading for bankruptcy

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Wed, 12/10/2008 10:53 AM  |  Business

Netherlands-based Indonesische Overseeze Bank N.V. (Indover), a unit of Indonesia's central bank, is heading for bankruptcy after a Dutch court approved the bankruptcy application, Bank Indonesia (BI) governor Boediono said Tuesday.

"The bankruptcy procedure will now follow the Dutch legal system," he told a hearing with the House of Representatives' Commission XI overseeing financial affairs.

"On Dec. 1, we received news from a Dutch court that the curator handling Indover's case had filed for bankruptcy," he explained.

Indover, bridging trade between Indonesia and European countries, suffered a liquidity shortage a few months ago, prompting a Dutch court to freeze the bank's assets on Oct. 6.

BI then tried to save Indover with a Rp 545.65 million euro (US$702.22 million) bailout, but failed to secure written approval from the House.

"Regarding the liabilities, we will comply with the Dutch laws," Boediono said.

BI said earlier it would take responsibility for the losses suffered by banks exposed to Indover.

Several state-run and foreign-owned banks had placed their money in the ailing Indover, believing their money would be guaranteed as BI had earlier issued a so-called "comfort letter", which was then translated by Indover as a BI guarantee.

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