Bank Century: Will Indonesia's Top Officials Survive the Fallout?

Economic and political analysts said over the weekend that the Rp 6.7 trillion ($663.3 million) Bank Century bailout controversy would not generate enough political steam to put serious pressure on two of the country’s most senior officials — Vice President-elect Boediono, the former Bank Indonesia governor, and reform icon Sri Mulyani Indrawati, the finance minister and acting chief economics minister. “I don’t think the case is strong enough to have them removed from office. This Century fiasco has been hijacked by a number of political interest groups to attack their track records,” said Adrinof Chaniago, a political analyst at the University of Indonesia. “It is definitely the central bank’s mess if we look into the case closely. That means that Boediono is the one who is primarily responsible, but he won’t go down unless they find he did something illegal,” he said. “I think that some of the central bank’s management will be forced to step aside because of this, but Boediono will remain untouchable.” Poerbaya Yudi Sadewa, an economist at the state-owned Danareksa Institute think tank, said the market’s perceptions of Sri Mulyani and Boediono as reformers remained unchanged, despite the Century imbroglio. “It’s hard to blame them for what they did as the economic crisis was then at its height,” he said. “Century’s failure could have posed a big threat to our financial system, even though the bank’s problems were mainly caused by the bank’s owner.” He agreed with Adrinof that the fiasco would have little chance of seeing Sri Mulyani or Boediono kicked out of office, although he added that the findings of the Supreme Audit Agency (BPK) would have to be published before it became clear what really happened. “Silence on the part of both Boediono and Sri Mulyani is a good tactic to keep the markets calm,” he added. Lawmakers and pressure groups have ratcheted up criticism of the roles played by Boediono, who was BI governor when the bailout took place in November 2008, and Sri Mulyani, who was finance minister. It is alleged that huge amounts of taxpayer funds were spent to save big depositors with the bank, including one of the country’s biggest business families, the Sampoernas, state-owned tin miner PT Timah, and state pension fund PT Jamsostek. Natsir Mansyur, a lawmaker from the Golkar Party and a member of House Commission XI, which oversees the financial sector, urged President Susilo Bambang Yudhoyono on Sunday to suspend Sri Mulyani as finance minister and chairwoman of the Financial System Stability Committee (KSSK), arguing that she was ultimately responsible for the affair. Andi Rachmat, a legislator from the Prosperous Justice Party (PKS), said the House was seeking a Supreme Court clarification as to whether the bailout was legal, although the government has repeatedly stated that it was entirely legal under the Indonesia Deposit Insurance Corporation Law. “We are going to seek the Supreme Court’s opinion on this,” he said. Meanwhile, Danang Widoyoko, the chairman of Indonesia Corruption Watch, insisted on Saturday that the bailout had primarily benefited large-scale depositors. “Big depositors withdrew Rp 5.6 trillion from the bank between December 2008 and July of this year,” Danang said. “They’re the ones who took advantage of the situation.” Iman Sugema, an economist at the Institute for Development of Economics and Finance (Indef), blamed the controversy on Bank Indonesia’s failure to take robust action, rather than endemic weaknesses in the supervisory system. “The bank had problems since 2003 but no firm action was taken by the regulators,” he said. “They claimed the bank was too important to fail, but this is only a small bank. Its assets only account for about 0.05 percent of all the assets in the banking system."

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