BDNI abused liquidity support, says witness

JAKARTA (JP): A central bank official testified on Wednesday Bank Dagang Negara Indonesia (BDNI) used liquidity support it received from Bank Indonesia to buy foreign currency from Bank Bali.

The deputy director at Bank Indonesia's Directorate of Banking Supervision, Mohammad Ali Said Kasim, told the Central Jakarta District Court that Bank Indonesia provided the ailing BDNI Rp 563 billion, which was meant to be used to cover the withdrawals of its customers.

He said BDNI received US$175 million from Bank Bali in the foreign exchange deal.

"That is categorized as a swap transaction between two banks," he said.

He said there was nothing wrong with such a transaction as long as the money was used in the interest of BDNI's customers.

Chief prosecutor Y.W. Mere asked Mohammad to clarify this statement, because Bank Indonesia had warned BDNI about the swap transaction.

The prosecutor said that in a letter dated Dec. 31, 1999, Bank Indonesia said the transaction violated a ruling by the central bank.

Mohammad said because BDNI was in such a poor financial state, it was prohibited from making any transactions for its own interests.

"We considered that BDNI abused the funds for its own interests," he said.

He also confirmed that BDNI's financial state had continued to deteriorate following the transaction.

According to data from Bank Indonesia, BDNI's debt reached Rp 8 trillion on Dec. 29, 1999, from Rp 563 billion on Oct.15, 1999, Mohammad said.

He said BDNI was ruled financially unhealthy on Oct. 15, 1997, and was taken over by the Indonesian Bank Restructuring Agency on Feb. 14, 1998.

The court is hearing the case against Bank Indonesia Governor Syahril Sabirin, who is accused of playing a role in the illegal disbursement of Rp 904 billion ($92 million) of IBRA's funds to Bank Bali.

Bank Bali contracted factoring firm PT Era Giat Prima to help it secure the money from IBRA. A total of Rp 546 billion ($55.7 million) of the money was paid to the firm as a commission for helping Bank Bali reclaim interbank loans owed it by several banks, including BDNI.

However, Bank Bali should not have required the services of PT Era Giat Prima, because the loans were guaranteed by the government.

The trial was adjourned until March 21, at which time the court will hear the testimony of several other witnesses. (04)