Monday, July 21, 2014

View Point: Jailing ex-BI governors and deputy governors


Given the critical condition, it was within the full authority of the BI board of governors and KKSK, based on the law on the financial safety net framework, to take such a contingency measure as changing the threshold for Bank Century to make it qualified for BI emergency liquidity credit, to prevent a full crisis. 

After the bailout of Bank Century, Indonesia did escape the global crisis unscathed and the economy began to recover strongly in 2009 and expanded by around 6 percent a year until 2012.

However, Boediono and Sri Mulyani’s defense of the Bank Century rescue was made very weak after the discovery of the massive cost overruns of the actual bailout, the questionable massive withdrawal of deposits a few days before and after the bailout, as well as the discovery of banking crimes by the bank’s owners and management.

The situation became murkier after vested-interest groups at the House jumped in and exploited the bailout issue to hold the Susilo Bambang Yudhoyono government hostage. 

But there is a caveat of debating now, that the situation has returned to normal and stable, as to whether Bank Century did pose a systemic risk to the banking industry. It is simply impossible now to reconstruct precisely the psychological condition of the policymakers and the national and international financial situation prevailing in November 2008. 

Any decision involves a choice from a number of alternatives. Decisions can be a choice of complex admixtures of facts and values especially in a critical situation.

The consequence of the court’s verdict on Mulya is that as the bailout was based on a collective decision of the BI board of governors and KKSK, all executive members — including Sri Mulyani and the seven members of the then BI board of governors — should also be brought to court.

In another twist that could also rock the stability of the financial system, Muliaman Hadad, chairman of the Financial Services Authority, currently the sole supervisor of the whole financial services industry, was a member of the BI board of governors in 2008.

The writer is a senior editor at The Jakarta Post.

Vincent Lingga, The Jakarta Post, Jakarta | Opinion | Sun, July 20 2014, 11:50 AM

0 comments:

 

Copyright © Vincent Lingga - Opinion Column