BI officials to be named suspects over loan scam

JAKARTA (JP): Three of Bank Indonesia's senior officials will soon be investigated over their alleged role in the abuse of the Rp 144.5 trillion (US$15 billion) bank liquidity support facility during the country's deepening financial crisis in the late 1990s, Attorney General Marzuki Darusman said on Friday.

"In one or two days, three senior Bank Indonesia officials will be investigated as suspects in relation to the bank liquidity assistance case," Marzuki told reporters.

Marzuki did not name the Bank Indonesia officials, however a state prosecutor said that Bank Indonesia deputy governors Miranda Goeltom and Aulia Pohan, as well as former deputy governor Iwan Prawiranata were allegedly involved in the controversial loan scandal.

The three could not be contacted for comment.

The government, through Bank Indonesia, injected some Rp 144.5 trillion into the liquidity support facility between 1998 and 1999 to assist ailing domestic banks meet cash demands from depositors amid a climate of massive bank withdrawals at the time.

But a report by the Supreme Audit Agency (BPK) revealed that some Rp 138 trillion of the loans were abused by banks, who used the funds to finance affiliated companies and for currency speculation.

Most of the loans were channeled to banks owned by the family and friends of former authoritarian president Soeharto.

The government initially demanded Bank Indonesia cover the losses, but the central bank rejected the request arguing that the decision to provide the loan facility was made by Cabinet.

The policy was implemented during the last year of Soeharto's rule, when Bank Indonesia was not an independent central bank but controlled by Cabinet. Bank Indonesia became an independent central bank in May 1999.

Forcing Bank Indonesia to cover the losses itself would either send it into bankruptcy or prompt the government to recapitalize it, both of which would seriously harm the central bank's credibility.

After intensive pressure from both the government and the House of Representatives, Bank Indonesia finally agreed last year to cover part of the loss.

The plans to question three top Bank Indonesia officials has raised further concern over the credibility of the central bank.

There has already been apprehension among investors and the International Monetary Fund, with particular concern over a bill proposed to amend the existing central bank law, which critics claim is merely designed to accommodate President Abdurrahman Wahid's wishes to replace Bank Indonesia Governor Sjahril Sabirin and his deputies before their terms end.

Sjahril said that the planned investigation of the senior Bank Indonesia officials would not impede them in continuing their duties at the central bank, as long as the process observed standard procedures.

"As long as it (the investigation) is conducted in a fair manner with normal processes, there will be no problem," Sjahril told reporters following the weekly Friday prayer at the central bank headquarters.

"I have personally gone through such a process," he added.

Sjahril is currently being tried over his alleged involvement in the high profile Bank Bali scandal. He denies any involvement. (rei)