Nasdem Against "Second Bail Out" Fund for Bank Century

Jakarta (Antara) - The National Democratic (Nasdem) Party urged the House of Representatives (DPR) to reject capital injection for Bank Mutiara, formerly the scandal-hit Bank Century. "We even ask DPR to recommend the dissolution of the bank, which only inflicts losses to the state," a Nasdem party leader Akbar Tanjung said. Early last week the Supreme Audit Agency (BPK) said Bank Century scandal caused a total loss of Rp7.4 trillion in state fund as a result of short term loan facility (FPJP) and a bail out by the government after it was categorized as a failed bank that could trigger systemic impact. BPK said there had been malfeasance committed by related officials in granting the FPJP from Bank Indonesia to Bank Century causing a loss of Rp689.3 billion in Nov. 2008 and in determining Bank Century as a failed bank that could trigger systemic impact that cause a loss of Rp6.76 trillion, which were given as a capital participation by LPS (state-owned Deposit Insurance Agency) in Bank Century from 24 Nov 2008 to 24 July 2009. The government and Bank Indonesia defended the granting of the FPJP and the determination of Bank Century as a failed lender saying allowing the bank to collapse could trigger run on bank amid the global financial turbulence in 2008. The House of Representatives, however, decided the bail out illegal, a decision that led to legal investigation by the Corruption Eradication Commission (KPK). At that time the bank had only a capital adequacy ratio of 2.02 percent much below the minimum limit of 8 percent to be entitled to FPJP. Bank Indonesia, therefore, changed the criteria, its own regulation, to allow the bank to receive the FPJP. Two former deputy governors of Bank Indonesia, Budi Mulya and Siti Chodijah Fajriah were already named suspects by the anti graft body which has also questioned Vice President Boediono, who was then governor of the central bank. The capital injection by the state-agency, Deposit Insurance Institution (LPS), has triggered furor with calls for investigations. Observers raised question what made the bank was suddenly unhealthy contradicting earlier claims by the management. The bank management has said it was financially healthy and it would be ready to be sold to recover the loss to the state fund as a result of the bail out. Akbar called the capital injection by LPS to meet the capital adequacy ratio requirement as a second bail out. The former outspoken lawmaker urged the Corruption Eradication Commission to speed up investigations of Bank Century case implicating leaders of Bank Indonesia to prevent larger losses. He described the decision of LPS with the approval of the central bank as an outright challenge to the law enforcement. "The case of Bank Century is now being investigated by KPK, the state prosecution office and police on conclusion that there had been abuse of power and losses in state fund in bailing out the bank," he said. (*)