IMF alarmed over banking scandal, urges resolution

JAKARTA (JP): The International Monetary Fund on Friday expressed great concern over the Bank Bali scandal, urging the authorities to act quickly and firmly to resolve the matter.

"The IMF is extremely concerned about recent reports alleging irregularities in a transaction involving IBRA, Bank Indonesia and a private bank," an IMF spokesman said in a statement from Washington.

The IMF said the decision by IBRA to launch a speedy investigation into the transaction and to publish its findings is absolutely necessary to bring the matter to a close.

The multilateral agency, which arranged a US$43 billion bailout program for Indonesia in November, 1997, urged the investigations to be concluded in a matter of days.

"We do fully support the appointment of an international auditing firm to validate the findings of the investigations. Anything short of this, will further damage domestic and international investor confidence," the spokesman added.

The IMF, he added, will continue to work with the relevant authorities to deal rapidly and rigorously with the matter.

In Jakarta, Bank Indonesia's Governor Sjahril Sabirin promised on Friday to announce preliminary results of investigations into the Bank Bali scandal sometime next week.

"We are investigating what has really happened," Sjahril told reporters.

Sjahril said investigations into the bank accounts will be completed next week but it would take more time to know the final results of the whole investigations.

Separately, the Center for Banking Crisis, a private banking watch organization, said it had filed a lawsuit at the State Administrative Court in Jakarta demanding that Presidential Decree No.26/1998 on the government guarantee on bank deposits and claims be revoked.

Deni Daruri, chairman of the center, said the presidential decree, though enacted in a bid to cope with the banking crisis, violated the article of the 1945 Constitution which stipulates that state finances shall be governed by law.

The decree was issued by then President Soeharto in late January, 1998, amid massive runs on domestic banks.

He added the blanket guarantee had been abused by unscrupulous bankers and officials, causing huge losses to the state.

Daruri said even if such a guarantee was really necessary to protect depositors, it should have been based on a government regulation in lieu of law, meaning that the ruling required an approval of the House of Representatives a few weeks after its promulgation. (vin)