Ex-finance ministers blame central bank for loan scam
JAKARTA (JP): Three former finance ministers blamed on Wednesday the central bank for the alleged mishandling of the controversial multibillion dollar liquidity support provided to ailing banks between 1997 and 1998.
Former finance minister Fuad Bawazier said that it was Bank Indonesia which had been "too creative" and misinterpreted the government bank liquidity support policy, which caused the liquidity support funds to reach a staggering amount.
Fuad pointed out that the government had never instructed the central bank to prevent bank closures by continuously providing liquidity support to ailing banks.
"There are banking stipulations which were not followed and implemented by Bank Indonesia," he told reporters following a closed-door meeting between the House of Representatives special investigation team and the three former finance ministers including Mar'ie Muhammad and Bambang Subianto.
Fuad didn't provide details.
But legislator Didik Supriyanto who attended the meeting said that the former finance ministers had recommended the central bank provide the liquidity support only to healthier banks facing bank runs, while insolvent banks should have been merged, nationalized or liquidated.
"Bank Indonesia misinterpreted the policy, and it's possible that there had been a maneuver by Bank Indonesia so that certain banks could receive the liquidity support," Didik said.
He said that the former finance ministers called on an immediate investigative audit into the case.
The bank liquidity support policy was launched in September 1997 amid plunging confidence in the country's banking system. The amount of the liquidity support channeled via Bank Indonesia has since inflated to Rp 164.5 trillion (US$23 billion) as of January 1999.
A general audit report by the Supreme Audit Agency (BPK) revealed that around Rp 80 trillion of the liquidity support may not have been properly channeled by Bank Indonesia.
The House has recently asked BPK to conduct an investigative audit into the case to clarify the status of part of the liquidity support funds.
BPK has said that it would complete the audit in three to six months.
Separately, former Bank Indonesia governor Soedradjad Djiwandono rejected the allegations made by the former finance ministers that the central bank misinterpreted the government policy.
Speaking in an interview with a private TV station, Soedradjad said that the central bank had to provide the liquidity support to protect the country's banking system from a complete breakdown.
Indonesia's banks suffered massive runs in 1998, particularly after the government shut down 16 banks in November 1997, and in the wake of the downfall of the former authoritarian president Soeharto.
The accusations against the former finance ministers is the latest rift among the country's political elite in relation to the large transfer of government funds to private banks in such a short period.
Among the largest recipients of the liquidity support were banks owned by businessmen closely linked to Soeharto. Around Rp 100 trillion were injected into banks owned by Sudono Salim (Bank BCA), Sjamsul Nursalim (Bank BDNI), Usman Admadjaja (Bank Danamon), Mohamad Bob Hasan and the Ongko family (Bank BUN).
There have also been allegations that the powerful bank owners misused the liquidity support for activities including currency speculation which helped send the rupiah to its lowest level of Rp 17,000 per U.S. dollar in 1998. (rei/03)