JAKARTA, KOMPAS.com - Former Bank Indonesia (BI) governor Boediono, who is now vice president, rebutted one of the conclusions from the investigation result of the Supreme Audit Agency (BPK) which stated that the Capital Adequacy Ratio (CAR) in BI's regulation was doctored so that Century Bank could receive the short term funding facility.
Boediono expressed his disagreement when answering a question from a member of the Century inquiry committee from Gerindra party, Achmad Muzani, during a hearing, Tuesday.
"Do you agree with the BPK conclusion that suspects a doctoring with the CAR?" asked Muzani.
Boediono gave a short reply, "No!"
"Are you saying that the BPK was inaccurate?"
"We have a different view."
"You don't really trust the BPK audit result? The BPK is the only audit institution mentioned in the constitution and its derivative regulations. How can you help the BPK audit from being final?"
Boediono answered that to his opinion the final truth is absolute and it cannot be claimed by any institution in Indonesia. For that reason, the results must be tried."
"Formally it is final. But, if we're looking for the truth, we must compare it to other views, other data.
However, the change in BI was for saving the situation at that time. I suppose we have to confront this later."
"Are you saying that the BPK report, which was quite lengthy, doesn't or hasn't yet described the situation comprehensively?"
"The length of the report doesn't reflect comprehensiveness, but an alternative view should be considered," Boediono answered calmly and also emphasized that he respects the capability of his BPK colleagues.
When asked whether he thought the Century bailout was the right decision, he confirmed that it was the best.
"The decision wasn't from me, Sir, but from the Committee for Financial Sector Stability. It was a collective decision and I'm very confident that our decision was the best for that time."
However, Boediono also highlights that if there was a legal problem, or a misconduct, then he agrees that it should be apprehended and resolved.
"But, the decision for a bailout was to curb the explosive situation. It was the best decision for our nation and even now I'm still sure of it and I'm ready to account for it in this life or the life after."
In the hearing Boediono also confirmed that the policy to bail out Century Bank for Rp. 6.7 trillion was known by President Susilo Bambang Yudhoyono. He confirmed this when answering a question from Bambang Soesatyo from Golkar party.
"Considering the extraodinary problem and since it concerns the state finance and the president being the highest overseer of the state finance, then was the president aware of this bailout?"
"It was reported, Sir. Immediately after decided it was reported."
In his testimony, Boediono explained that the bailout policy was done because of the crisis. According to him, in many other countries, including Indonesia, a major capital outflow was happening because almost all countries had blanket guarantees.
The USD exchange rate on November 24, 2008 was up to Rp. 12,700 per USD. The BI reserves was depleted to hold the currency was getting wildly out of control. At the peak, the reserves was down by USD 6.5 billion, from USD 57.1 billion in September 2008 to USD 50.6 billion in October 2008.
Due to the massive capital outflow, liquidity was low in the country and banks had trouble managing their flow of funds. In October 2008, state-owned banks asked for liquidity support up to Rp. 15 trillion from the government to cover their shortage.
The inquiry committee also inspected the BI senior deputy governor Miranda S. Goeltom and later in the evening, the BI deputy governor Budi Rochadi.
BI Vs BPK
In grating the short term liquidity support (FPJP), the BPK audit result stated that BI is suspected of doctoring the CAR requirement in the BI regulation (PBI) so that Century Bank could receive the FPJP. When the FPJP was granted, Century Bank's CAR was at negative 3.53 percent. That was against the BI regulation No. 10/30/PBI/2008.
However, according to Boediono, the 8 percent CAR minimum requirement that was changed to just positive CAR was done to save the whole banking system considering that the macro-economy was worsening.
Furthermore, at that time there were three banks whose CAR have fallen below 8 percent.
Boediono stated that when the FPJP was granted, Century Bank's balance per September 30 2008 was still at 2.53 percent so it was still positive. While the BPK used the balance on November 2008.
The inquiry committee also questioned why a small bank like Century Bank could have systemic effect. To answer this, the BI officials stated that normally Century Bank wouldn't have systemic effect. But during a crisis, even a small bank could have systemic effect.
That according to Boediono happened in 1997. At that time the closing of 16 banks whose combined market share was only 2.3 percent of the total banking asset caused a psychological impact in the finance market and it spread onto other banks. The condition caused a banking crisis.
Because of the 1997-1998 crisis, the government and BI had to spend Rp. 600 trillion for recapitalization and liquidity support. (SUT/FAJ/C17-09)
