Burhanuddin optimistic on resolving BLBI dispute

Burhanuddin optimistic on resolving BLBI dispute

The Jakarta Post, Jakarta

Bank Indonesia Governor Burhanuddin Abdullah has expressed
optimism that an agreement could soon be reached on how to
resolve the financial mess resulting from the disbursement of
liquidity facility (BLBI) to troubled banks in the late 1990s.

"I hope it will not continue to drag on. I'm optimistic it can
be settled," he was quoted by Antara as saying following a
meeting with People's Consultative Assembly (MPR) Chairman Amien
Rais on Tuesday.

He said the central bank and the finance ministry would soon
resume negotiations over the issue with the House of
Representatives Commission IX on financial affairs.

Burhanuddin said the central bank was open to demands from the
Indonesian Bank Restructuring Agency (IBRA) to be included in the
talks.

"To make all things clear, it would probably be better if we
hold talks with IBRA," he said.

He did not provide details.

The central bank channeled Rp 144.5 trillion (around US$17.5
billion) in liquidity support facilities to some banks between
1997 and 1998 to help them cope with the massive bank runs at the
time. The finance ministry is supposed to subsequently reimburse
the central bank, but it backed off from the commitment following
revelations that most of the money was misused by the banks and
their owners. The ministry faulted the central bank for poor
supervisory work.

Since 2000, the central bank and the finance ministry had been
engaged in a dispute on who should cover the financial losses.

Only recently the two sides agreed on a burden sharing
mechanism, under which the ministry would issue perpetual
promissory notes. The House, however, has yet to approve the
deal.

Last week, IBRA Chairman Syafruddin Temenggung challenged the
agreement, by saying that out of the Rp 144.5 trillion in
liquidity support facility, only around Rp 129.42 trillion was
backed up with collateral mainly in the form of securities, and
only Rp 12.34 trillion had commercial value. The central bank had
transferred the securities to IBRA, which is in charge of selling
the assets to recover some money.

IBRA demanded that it be included in the current negotiation
process.

Seeking settlement for the four-year dispute over who should
cover the financial losses is crucial, not only to instill
certainty to government finances, but is also important to
maintain confidence in the central bank.