Bank Century Bailout Scandal

Dec 8th, 2009, in News, by

Bank CenturyCenturygate scandal, Boediono & Mulyani under pressure, SBY sees dire threats to his good self.

BoedionoThe long troubled PT Bank Century (now PT Bank Mutiara), once the country’s 13th largest bank, in late October 2008 defaulted on several large loan payments and was declared insolvent by the Financial Sector Stability Committee (Komite Stabilitas Sektor Keuangan (KSSK)), which was led by Finance Minister Sri Mulyani and included then BI Governor now vice president Boediono. It had been under supervision by Bank Indonesia (BI) since 2005.

Boediono’s declaration at the time that the bank’s financial weakness now

posed a systemic threat to the banking system

was the key factor in Bank Century thereafter being taken over by the Deposit Insurance Agency (LPS) and a series of massive injections of state funds into it proceeding, totalling 6.7 trillion rupiah or almost $700 million, over a period of nine months. Minister Sri Mulyani concurred with the BI Governor’s judgement.

Sri MulyaniAs the parliament became aware of the scale of the bailout in mid 2009 its Commission XI for financial affairs held hearings with Mulyani and BI senior deputy governor Darmin Nasution, and soon ordered the Supreme Audit Agency (Badan Pemeriksa Keuangan (BPK)) to launch an investigation.

The scandal that has become known as “Centurygate” revolves around not only the massive drain on state funds involved, but questions of whether some depositors (such as tycoon Boedi Sampoerna) had preferential treatment or access to their funds after the bailout money had been injected, and whether some of the money was diverted and embezzled.

SBYPresently a parliamentary enquiry named “Panitia Khusus Centurygate” (Pansus Centurygate) is underway, and much politically inspired rhetoric has emanated from it, with some calling for the dismissal of Mulyani and vice-president Boediono over their involvement in the case, and even their impeachment.

Meanwhile President Susilo Bambang Yudhoyono (SBY), who retrospectively approves of the bailout as a sound financial decision, has been accused of being weak in handling the fallout from the affair and is becoming increasingly ‘testy’ and bad-tempered about the matter. A planned mass demonstration on 9th December to mark International Anti-Corruption Day has had the president vocally worrying that there are those who wish to topple him, and warning against any repeat of the May 1998 riots in Jakarta.

11 Comments on “Bank Century Bailout Scandal”

  1. Ross says:

    SBY would be more convincing about his fear of ‘revolution’ – or is it a coup – if he cut the verbiage about hidden hands and specified who the ‘bad guys’ really are.

    We know that some demos include hired louts and layabouts eager to get lunch money and a day out. The pro-police demo recently was one such, as reported, with interviews, by TVOne, which was the channel I watched at the time, so yes, one must be on guard.

    But all this opaque talking-in-riddles stuff only gets ordinary folks upset. I hope that thousands turn out against corruption and that SBY gets the message and starts hanging a few dozen of the worst cases to encouragez les autres.

    Mind you, traffic will be tough tomorrow!

  2. David says:

    None too subtle cartoon;

  3. deta says:

    Poor Pak SBY….. don’t say that I didn’t remind you that being president is not that easy…

  4. Ross says:

    Well, just home and watched the news, no revolution, no coup, but in Makassar an amok-run by cretins inexplicably described as ‘students.’ With i.q. levels akin to gants’, they decided to smash up the local KFC, plus parked cars which might as easily have been owned by their rels!

    Seems to me that the cops ought to have been a lot more pro-active in hammering these braying jackasses. As Jakarta’s peaceful and bigger demo showed, there was no violence and no need for it. And if they were students, it’s time for their colleges to kick them out and let in some of the thousands of bright young people from poor families who can’t get a place.

  5. Q says:

    I think the whole situation reeks both ways. You bail the bank out and everyone wants you down for corruption (and of course there preferential treatment here).

    You don’t bail the bank out … well, this was early 2009, GFC was about to hit. It could have triggered a domino effect that ends up with the US at Rp 15,000 and huge budget deficit because of fuel subsidy.

    Either way, I reckon political attacks such as these would be inevitable.

    And if you want to stage a demonstration, do it as a protest against things like this:

  6. Ross says:

    Thanks for joining in, Oigal. Was beginning to think nobody was interested.
    Nice to see Mrs. Sri in the WSJ actually naming the Golkar kingpin Bakrie.
    If other pols would be as specific as to whom they blame for these machinations, debate would be a lot more useful here.

  7. Ross says:

    Sorry, it was Q, not Oigal. Too early in the day, and I haven’t run across Q before.

  8. David says:

    Nice to see Mrs. Sri in the WSJ actually naming the Golkar kingpin Bakrie.

    You just beat me to mentioning that… here it is.

  9. deta says:

    So now the case evolves into the personal relationship problem between Sri and Bakrie…. does it make any difference?

    She also mentioned about the last five years… Yes, SBY looked quite good and sincere in eradicating corruption in his first term, and I guess this is the main reason why people chose him for the second term. KPK, acted as a respectable and trustable body that swept corruption gave Indonesian people hope to have a cleaner, fairer country. But all turned out wrong and disappointing in the second term, started with the Century Bank Scandal. Can’t we hope something good last for long in Indonesia? And if all the bankruptcy caused by fraud and mismanagement should be saved by a bailout using the people’s tax money, how much more should we bear?

    It certainly needs more than guts to fix all of ’em.

  10. molceonly says:

    i would say, all that mumbling inside pansus is horsesh*t. none of the member of the team would get this issue done. because they do know what that’s mean if Century gate never happen. that means riot 98 again and probably total revolution again. what a poor Indonesian.

    all the teams just trying to be a good actor for their party and people who choose them from the election days… that’s all….

  11. ADI YAKSA DAULAY SH , MKn says:

    presiden harus mengambil langkah yang tepat dalam manangii skandal bank century , dan semua permasalahan keuangan perbankan dan permasalahan yang timbul akibat kejadian perkara harus melalui jalur yang berlaku di indonesia . dan meminta kpk menangani permasalahan di indonesia .

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