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109248
Tue, 03/02/2010 - 00:03
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News Focus: PRESIDENT DEFENDS BANK CENTURY BAILOUT

By Andi Abdussalam
Jakarta, March 1 (ANTARA) - One day before the House of Representatives (DPR) begins its two-day plenary sessions to take a decision on the final views of its factions in the Bank Century Inquiry Committee, President Susilo Bambang Yudhoyono, when he met with 30 bankers on Monday, spoke up to defend the government's move to bail out ailing Bank Century in late 2008.

The President met about 30 bankers at the Merdeka Palace for a talk about the current economic situation and for obtaining inputs about the Bank Century bailout amounting to Rp6.7 trillion.

The meeting was held one day ahead of the DPR's plenary sessions which will make a decision regarding the inquiry committee's finding that violations were committed in the disbursement of the bailout.

Having conducted an investigation for about two months, the House Inquiry Committee held a plenary last week to present its final views over the bailout.

Of the nine factions of the House in the committee, seven mentioned that violations had been committed with regard to the issuance of the Short-Term Funding Facility (FPJP) and Temporary Capital Participation (PMS) amounting to Rp6.7 trillion for Bank Century.
Only two factions held the opinion that the extension of the FPJP and PMS did not violate any regulation because it was done in accordance with the required procedures. The two factions are the factions of the ruling Democratic Party (PD) and the Nation's Awaking Party (PKB). PKB is one of the parties in PD's ruling coalition partners.

On the flow of funds from Bank Century, all the nine factions mentioned that violations had been committed, but they differed on who committed the violations.

Four factions mentioned the names of persons or state officials who were responsible for the violations that had been committed in the Bank Century case, these factions were of the Indonesian Democratic Party of Struggle (PDIP), the Prosperous Justice Party (PKS), the Golkar Party and the People's Conscience Party (Hanura). PKS and Golkar are partners in the ruling coalition.

PKS and Golkar had stated that Boediono (former governor of the central bank, now Vice President) and Sri Mulyani (former chief of the Financial System Stability Committee - KSSK) as the most responsible persons in the Century bank case.

In a meeting with bankers, however, President Yudhoyono said that the government's decision to bail out Bank Century in 2008 was correct in that it had saved the national economy and banks from the impact of the global financial crisis. He was ready to take responsibility for the decision to inject Rp6.7 trillion into the failed bank to prevent it from total collapse.

"I say that what was done to save our economy and the banking sector was right. As a policy, a measure to save the economy and the banking sector, it was correct and I am responsible for it although in terms of technical operations it was done by state officials in charge of financial affairs based on the law. Although I did not specifically issue an instruction or directive to bail out the bank, I justified the actions taken to that effect," he said.

In the meantime, former chief of the KSSK Sri Mulyani Indrawati, who is also the finance minister, also defended the government's bailout of Bank Century saying that all parties should accept the decision because it was done to save the national economy. She said the bailout was justified based on credible reasons and prudently decided in response to the global economic crisis.

Sri Mulyani said, from the beginning, the head of state had confirmed that the government's decision about the troubled bank was right. "What bankers have conveyed gives a kind of relief that the measures taken by the government have been able to give stability in the financial field but it was expensive," she said after a meeting with the House Budget Committee on Monday.

Bankers during the meeting with the president stated that the government's decision to take over Bank Century in the midst of global financial crisis in 2008 was correct.

According to President Yudhoyono, although the decision was taken while he was abroad it was actually not necessary for the state officials concerned to ask for his approval to do it as by law the finance minister and the central bank governor had the authority to do it and had to do it quickly.

President Yudhoyono said the decision to bail out the bank was preferred above another option, namely closing the bank at the cost of around Rp6 trillion to repay third party funds.

"The options were closing the Century Bank and paying Rp6 trillion or bailing it out with Rp6.7 trillion with the management being taken over, and the possibility of the funds being recovered," he said.

In the meantime, the House Bank Century Inquiry Committee is to present three alternative recommendations to the House's plenary where the House is to decide its stance on the controversial case on Tuesday.

The head of the committee's team tasked with formulating the committee's conclusions and recommendations, Mahfudz Siddiq, said at a plenary meeting of the committee on Monday that "this is the best result the team can achieve."
He said the three alternative recommendations are 'Alternative A' which consists of seven conclusions and six recommendations, 'Alerantive B' of 17 conclusions and six recommendations and 'Alternative C' of four conclusions and five recommendations.

The three alternatives were formulated after several negotiations with a consequence of distortions on party factions' differing views particularly on the Short-term Funding Facility (FPJP) and the temporary capital participation (PMS).

Mahfud said when the team was formed some had suggested that it would later produce only one conclusion and one recommendation. However after discussions the idea could not be realized due to fundamental differences, he said.






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