Century White Book Strips inside Department of Finance

JAKARTA, KOMPAS.com - George Junus Aditjondro's book, "Unravelling the Cikeas Octopus", caused a controversy. The book, which discusses the connection between the Cikeas circle (SBY's clique) and the Century Bank scandal, stirred the people. Considering the need to clarify the matter regarding Century Bank, the Department of Finance has published a white book titled "the Government's Effort to Avert and Handle the Crisis".

The book was started in December 2009 by the Department of Finance's Assisting Team for Financial System Crisis Socialization, and it explaind the effort to save the troubled bank. The book tries to elaborate the process of decision making of the Committee for Financial Sector Stability (KSSK) to grant the bailout for Century Bank, which has changed its name to Bank Mutiara. Mostly it's about the government's success in averting the Indonesian economy from the grip of the global financial crisis.

Most of the book contains newspaper clippings or supporting data, such as from the IMF, World Bank, or Bank Indonesia (BI), and other sources besides.

The 74 page book consists of 10 chapters. Chapter I starts with 'Century Bank, a Polemic Behind the Economic Crisis Recovery'. In this chapter it's explained that at first the bailout disbursement was a polemic so in the end the House of Rep. suggested an inquiry to investigate the handling of Century Bank.

The polemic started on November 21, 2008, when Century Bank was handled by the Deposit Insurance Agency based on the KSSK's decision. The original temporary capital support, which was Rp. 683 billion, then bloated into Rp. 6.67 trillion. This angered the Commission XI of the House, and even Jusuf Kalla, the VP at that time, because they felt that they weren't involved and they suspected something odd with the bailout. The KSSK chief, Sri Mulyani Indrawati, and KSSK member Boediono, who is now VP, were then accused of causing the decision making mechanism to be untransparent and unproportional.

The fireball rolled on, and by the end of July 2009, the Commission XI of the House protested against the decision. Even the BI  analysis, that if Century Bank hadn't been saved it would've caused a systemic effect, was doubted by many parties.

The book then continued to discuss that the House finally asked the Supreme Audit Agency (BPK) to conduct an investigative audit over the handling of Century Bank. Based on the audit result from the BPK, the House suggested an inquiry to follow-up on the result. The chapter also quotes a news clipping from Kompas daily, September 1, 2009 edition, that has the comment from VP Jusuf Kalla denying Sri Mulyani's statement of having reported Century Bank on November 22, 2008. There is also a clipping from Antara news agency, from September 10, 2009, with the statement of Ramson Siagian, member of Commission XI.

"This is a misperception, because the government still considers the government regulation-in-lieu-of-law as valid, because the House didn't firmly state that it was rejected, so it's a gray area. At that time the House wasn't firm in rejected the government regulation-in-lieu-of-law regarding the JPSK (financial system safety net), but asked so that the government processes the JPSK draft, so that means for the government while the draft isn't finalized then the regulation-in-lieu-of-law is still valid. The House should have stated a rejection first," stated Ramson as quoted in the white book.

Chapter II is titled "Anticipating the Global Crisis on the National Financial System". It discusses the global crisis that started from the subprime mortgage crisis in the United States. The crisis expanded to ruin the banking system of the US, then Europe's and Asia's. The crisis caused a domino effect on the financial institutions of many countries around those regions, including Indonesia.

Chapter VI, titled "BI, KSSK, LPS: Sharing Roles in Anticipating the Crisis" (LPS is the Deposit Insurance Agency), discusses the roles of those three institutions in handling Century Bank. BI functions as the supervisor over Indonesian banks. If BI found a bank in trouble that would have systemic effect then it would reccomend a meeting for the KSSK according to the government regulation-in-lieu-of-law. KSSK is supposed to set a policy to prevent and handle the crisis. The KSSK would try to aim for a consensus, but if it's not reached then the KSSK chief, which is the minister of finance, would have the right to decide independently. Then the Coordinating Committee (finance minister, Bank Monitoring Bureau, BI, and LPS) would handover the matter to LPS.

Then there was the marathon of meetings in November 2008, from the 13th to the 21st of November. The series of meetings culminated in a KSSK meeting on November 21, 2008, from 00.11 to 04.25 am, adjourned, then from 04.30 to 05.30. The meeting was attended by the minister of finance as KSSK chief, BI governor, KSSK secretary, and Arif Surowidjojo as legal consultant.

The meeting decided that Century Bank as a bank that might cause systemic failure should be given over to the LPS, according to KSSK decision No. 04/KSSK. 03/2008, for bailout.

Chapter VII is "Cost of Century". Basically it presents two calculations in juxtaposition, to compare the cost estimate between closing Century Bank or bailing it out. The cost to bailout for the LPS, by the end of the fifth year and calculated conservatively, is around Rp. 3.7 trillion. While if it were closed the cost could go up to Rp. 5.8 trillion, without calculating other costs if other banks were closed so that the LPS would have to cover the insurances.

Chapter VIII, the finance minister states that the decision to bailout Century Bank was accountable and it was reported. On November 21, 2008, in the morning, the KSSK reported its result in written to the president, and verbally to the VP on November 25, 2008. The minister of finance, Bi governor and his subordinates, the chief of LPS commissioner council, and the National Police chief detective have all reported the matter to the Commission XI of the House through the work meeting on February 26, 2009. (ANI/C17-09)