Laugh last, laugh longest: (Left to right), Attorney General Hendarman Supandji, Corruption Eradication Commission (KPK) acting chairman Tumpak Hatorangan Panggabean and National Police chief Gen. Bambang Hendarso Danuri pose for photographers after attending a hearing with the House of Representatives Commission II on legal affairs in Jakarta on Wednesday. JP/P.J. Leo
Minutes of a meeting revealed Bank Indonesia insisted on saving Bank Century despite warnings from the Capital Market Supervisory Agency (Bapepam) and Finance Minister Sri Mulyani Indrawati.
The Nov. 21, 2008, meeting was the last meeting before the decision to save Bank Century was made.
The report of the minutes, which was distributed Wednesday by Dradjad Wibowo, an economist and a former legislator, also indicated the then Bank Indonesia governor, Boediono (currently Vice President), apparently did not provide sufficient data to support claims by some that Bank Century’s collapse could lead to a systemic threat to the country’s banking system.
According to the report, Bapepam argued that “Bank Century was just a small bank, and therefore, it would not pose a serious and significant financial risk to other banks.”
Bapepam also said that should a bailout to salvage such a small bank be undertaken, then it could potentially create negative perceptions of the solidity of the country’s banking industry.
Sri Mulyani also argued that if the state bailed out Bank Century, it could create precedents for
other banks, which would interpret the action to mean that they would also be saved should they get into trouble.
Bank Indonesia responded to the arguments by claiming the systemic risk was “difficult” to measure and that it was better to act prudently on the Bank Century issue.
The report then showed that Bank Indonesia was not able to justify with concrete data its arguments on the importance of salvaging Bank Century, and that Sri Mulyani’s final opinion was that “all possible risks, including those related to a systemic threat, must be clearly presented and discussed” before making the decision.
After her opinion, followed by another argument from Bank Indonesia that salvaging Bank Century was important, the report jumped to its final conclusion, stating that Bank Century was systematically damaging, without details on what the systemic damage was.
Dradjad said based on the report’s sudden jump to its conclusion, there was a missing link that needed to be investigated thoroughly.
“There is a ‘black hole’ in this report that needs to be identified by the Supreme Audit Agency [BPK],” he said.
The BPK is currently conducting its financial audit on the Bank Century debacle, which is said to have cost the state Rp 6.7 trillion (US$716 million). The fund is in the form of a bailout, which was originally estimated at Rp 632 billion.
“Everyone attending the meeting must be questioned so that we can find out who was responsible for authorizing the bailout,” Dradjad said.
More than 200 legislators at the House of Representatives also claimed the Bank Century debacle had spilled over into the political domain and called for the establishment of an inquiry committee on
the scandal.
Dradjad said he hoped the inquiry committee, once established, would investigate the scandal even further to settle it.
Legislators from eight out of nine factions in the House have signed a petition requesting the formation of an inquiry committee. The only legislators yet to sign the petition are from President Susilo Bambang Yudhoyono’s Democratic Party.
In a separate development, legislators at the House Law Commission demanded the National Police, the Attorney General’s Office (AGO), and the Corruption Eradication Commission (KPK) improve inter-agency cooperation to eradicate acts of corruption, such as may have allegedly occurred in the Bank Century scandal.
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