BI executive stands by Sjahril<\/p>\n
JAKARTA (JP): Central bank senior deputy governor Anwar
\nNasution said on Thursday it would be completely unfair to
\nsuspend Bank Indonesia's governor Sjahril Sabirin from duty for
\nalleged irregularities in the extension of emergency liquidity
\ncredits to commercial banks.<\/p>\n
Anwar told reporters that the alleged abuse of the liquidity
\nsupport from the central bank took place before Sjahril took over
\nfrom the previous governor, Soedradjad Djiwandono, in February,
\n1998.<\/p>\n
\"I fully support the investigative audit on Bank Indonesia
\ncurrently conducted by the Supreme Audit Agency. But the fact is,
\nmost of us (board of governors) were only appointed after most of
\nthe liquidity credits had been extended,\" Anwar said.<\/p>\n
Anwar, who will take over the governorship if Sjahril is
\nunable to perform his duty, was commenting on rumors that
\nPresident Abdurrahman Wahid is considering recommending to the
\nHouse of Representatives that Sjahril be replaced.<\/p>\n
The issue first surfaced early this year, after a general
\naudit on the central bank by the Supreme Audit Agency concluded
\nthat Bank Indonesia was almost insolvent due to huge losses
\nincurred by the abuse of its liquidity support to ailing banks
\nbetween late 1997 and early 1998.<\/p>\n
The audit alleged that Rp 80 trillion (US$11 billion) of the
\nRp 164 trillion in emergency liquidity support extended by the
\ncentral bank was not according to procedures.<\/p>\n
Most of the emergency loans were extended between December,
\n1997, and early 1998, amid massive runs on many banks, as the
\npublic lost confidence in the banking industry after the closure
\nof 16 banks in mid-November, 1997.<\/p>\n
The report also accused the governor and deputy governors of
\nbeing lax in bank supervision and accounting standards. However,
\nboth men flatly denied any wrongdoing in the extension of the
\nliquidity support and asserted that the central bank remained
\nhighly solvent.<\/p>\n
Shocked by the revelation, the House made its own
\ninvestigation into the case and recommended an investigative
\naudit on the central bank, which is currently underway.<\/p>\n
However, the rumors of the imminent replacement of Sjahril
\nbecame stronger early this week after Minister of State
\nEnterprises and Investment Laksamana Sukardi stated his
\nwillingness to replace Sjahril.<\/p>\n
Laksamana, formerly an executive director of Lippo Bank,
\nconfirmed on Thursday that the President was considering
\nrecommending him to replace Sjahril.<\/p>\n
Speaking to reporters after a hearing with the House,
\nLaksamana said he was ready to hold the position (of central bank
\ngovernor) because he used to be a banker himself.<\/p>\n
The new Central Bank Law, enacted in May, 1999, guarantees
\nBank Indonesia's independence from executive control. The law
\nstipulates that only the House can remove a central bank governor
\nand only when the official is found to have violated Indonesian
\nlaw.<\/p>\n
Anwar said the policy on emergency liquidity credit was made
\nby the government when the central bank was still led by
\nSoedradjad.<\/p>\n
\"I hereby call upon those responsible for setting the policy
\nto come forward, be magnanimous and make the plunge and account
\nfor that policy,\" Anwar added.<\/p>\n
Anwar said he himself was still flabbergasted by the question
\nas to why the central bank had extended liquidity support to
\noutrightly insolvent banks.<\/p>\n
Steve Hanke, who acted as a special adviser to former
\npresident Soeharto in early 1998 when Indonesia was considering
\nadopting a fixed exchange rate system under a currency board,
\nalso asserted in an article in the Asian Wall Street Journal on
\nWednesday that the central bank had massively abused its lender-
\nof-last resort responsibility.<\/p>\n
Hanke, a professor at Johns Hopkins University in Baltimore,
\nU.S., after reviewing Bank Indonesia's books at the request of
\nSoeharto in February, 1998, concluded that the central bank had
\nextended the equivalent of $37 billion in liquidity support
\nbetween December, 1997, and the end of January, 1998.<\/p>\n
Hanke added that Soedradjad was abruptly fired by Soeharto in
\nmid-February, 1998, because of his disclosure on the massive
\nabuse of liquidity credits, not due to the governor's opposition
\nto the planned currency board, as widely reported at the time.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bi-executive-stands-by-sjahril-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}