Ex-Bank Indonesia head accused over bailout

A parliamentary investigation into a bank bailout threatens to thwart the political ambitions of Indonesia's previous central bank governor and the institution's role as supervisor.

Allies of Susilo Bambang Yudhoyono, Indonesia's president, have attacked Boediono, the governor of the central bank from mid-2008 until mid-2009 who is now vice president of the country, and Sri Mulyani Indrawati, the country's finance minister who was nominated to succeed Boediono last June, for their role in the bailout of Century Bank.

Bloomberg, a news agency, reported spokespeople for both the Prosperous Justice Party and Golkar saying that the vice president and finance minister were at fault for their role in the bailout, which took place in late 2008. Both the Prosperous Justice Party and Golkar are members of Yudhoyono's coalition government.

A cross-party committee is investigating the bailout and is set to present its findings to parliament on 2 March.

The attacks threaten to undermine efforts to transform the archipelago's economy. Investors regard Boediono and Indrawati, a former International Monetary Fund, as key figures in the economic development of the world's fourth most populous country. Yudhuyono was voted in on the back of a pro-reform agenda and will be reluctant to let the two go. Boediono's position is regarded as safer than the finance minister's, whose agenda has rankled with traditionalists.

The investigation has also found fault with the central bank's role in regulating Century Bank. The inquiry, which covers from 2004 to 2009, found that the central bank violated procedures during the bank's merger, which took place in

The central bank in November denied this. "Bank Indonesia deeply regrets that the audit results [into the central bank's handling of Century Bank] do not fully illustrate the facts and problems as detailed in the response provided by Bank Indonesia to the audit board," the central bank said. "Bank Indonesia also regrets the absence of any consideration of the global crisis and its effects on the Indonesian economy in the audit report as a background to the rescue of Century Bank. Regarding the prevalent threats and widespread uncertainty due to the impacts of the financial crisis on the national economy, the government was urged to promulgate legal measures in the form of regulations in lieu of a law as a basis for government and Bank Indonesia financial sector policy."

The central bank deemed the bailout necessary owing to the systemic impact of failure, saying it "must be seen in the context of saving the financial system, the banks and the economy as a whole in light of the then ongoing impacts of the global economic crisis."

Since the bailout, Century Bank has been renamed Mutiara Bank.