As the first serving Vice President in Indonesian history to appear as a witness in a court hearing '€” which centers on the country'€™s biggest graft case '€” Boediono shed some light on the decision-making that led to the controversial bailout of Bank Century in 2008.

Boediono, who was then Bank Indonesia (BI) governor, along with then finance minister Sri Mulyani Indrawati, jointly decided to salvage the bank at the height of the global financial crisis, with a bailout that eventually swelled to Rp 6.76 trillion (US$578 million).

The Corruption Eradication Commission (KPK) classified the bailout as state losses and named then BI deputy governor Budi Mulya as the first suspect in the case.

Boediono gave his testimony, at a hearing in Budi'€™s trial at the Jakarta Corruption Court on Friday that lasted for about nine hours, which could spell trouble for him down the line.

Boediono, accompanied during the trial by his old friend and head of the Presidential Working Unit for the Supervision and Management of Development (UKP4), Kuntoro Mangkusubroto, admitted to concealing Bank Century'€™s troubled finances in a Cabinet meeting held weeks before the bailout decision.

In a meeting on Nov. 10, 2008, headed by then vice president Jusuf Kalla, Boediono said he decided to keep silent on the deteriorating situation of the bank as he feared stirring panic among the ministers.

'€œIt would'€™ve been suicidal to bring up Bank Century in a meeting as big as that,'€ Boediono said.

The Vice President, who served for less than six months as BI governor prior to the bailout, argued he would not have risked sharing sensitive information that could have caused the general public to panic.

Boediono said the meeting was attended by a large number of ministry officials, who despite their positions in the government, harbored the same fears.

'€œIf word had spread that there was a bank troubled with insufficient liquidity, then it would'€™ve caused a run within an hour,'€ he said.

A run on a bank happens when account holders withdraw their money from banks in large quantities, which is usually triggered by growing distrust in the banking system.

Kalla testified on Thursday that he had not received word of any ailing bank from either Boediono or Sri Mulyani during the meeting in question.

The KPK suspected an intention by policymakers at the time to engineer a situation to force the rescue of the bank without sufficient economic justification and without the prior knowledge of other related officials.

Boediono'€™s testimony also revealed he did not verify the proposed changes to the original amount required for the bailout funds.

The proposal to lower the required funds to Rp 632 billion from Rp 1.77 trillion, hours before the bailout decision on Nov. 21, 2008, was a crucial factor that eventually convinced Sri Mulyani to approve the bailout.

According to a KPK indictment, if the proposed amount had been excessive, there was a possibility that the bailout option would have been rejected by Sri Mulyani, as the head of the Financial System Stability Committee (KSSK).

The KSSK is a joint forum involving the Finance Ministry, BI, the Deposit Insurance Corporation (LPS) and other related institutions, which makes decisions on measures to prevent financial crises.

Boediono insisted that the decision to salvage the bank was a '€œnoble'€ one, made for the sake of preventing the country becoming engulfed in a financial crisis.

In response to the prosecutor'€™s question regarding Sri Mulyani'€™s disappointment in her testimony last week over the inaccurate data presented by BI officials for deciding the bailout, Boediono said he was not privy to the process.

He emphasized that the KSSK and the process taken emerged from a desperate situation.

'€œIn a crisis, any estimates we make to cover the costs are always tentative, because it depends on how things pan out,'€ said Boediono.

At the end of his testimony, Boediono made a speech thanking the KPK for carrying out the investigation, including treating the Vice President equally the before law.

Muhammad Misbakhun, one of the initiators of the legislative inquiry into the Bank Century controversy, said Boediono'€™s testimony, coupled with the evidence presented in court, indicated the active role of Boediono in the case.

'€œAlthough he [Boediono] kept saying he forgot in response to important questions from prosecutors, the facts reveal he was actively involved in engineering the bailout process,'€ said Misbakhun. '€œIt'€™s about time the KPK named Boediono a suspect in the case.'€

According to the KPK indictment, Budi'€™s alleged crime was committed '€œcollectively'€ by Boediono, BI senior deputy governor Miranda Goeltom and BI deputy governors Siti C. Fadjrijah, Budi Rochadi, Muliaman Hadad, Hartadi Sarwono and Ardhayadi Mitroatmodjo.

The KPK, according to the document, alleges that Budi and his '€œcolleagues'€ abused their authority in channeling the loan to keep Bank Century, now Bank Mutiara, afloat.

They are also alleged to have abused their authority in categorizing Bank Century as a potentially failed bank that posed a systemic threat to the banking sector.

Politicians have accused President Susilo Bambang Yudhoyono'€™s inner circle of misusing the bailout to finance Yudhoyono'€™s 2009 reelection bid.

The issue has since created a firestorm of political controversy, dogging the Yudhoyono administration with threats of impeachment by members of his ruling coalition. (tjs)

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