Kalla says Bank Century bailout had no legal basis

JAKARTA. Former vice president Jusuf Kalla has said that the 2008 Bank Century bailout had no legal basis because the government does not allow blanket guarantees for troubled banks.

A blanket guarantee is a declaration by the government that all deposits and potentially other financial instruments will be protected.

"On November 13, 2008, it was only reported that Bank Century failed the clearing, and I told them that it was normal. But I emphasized that there must not be a full guarantee so we should not conduct a bailout," Kalla was quoted as saying by tribunnews.com while testifying as a witness for Budi Mulya in the Jakarta Corruption Court on Thursday.

Kalla explained that the bailout was clearly in violation of several government regulations.

He added that the coordinating economic minister, state-owned enterprises minister and state secretary at the time approached him to ask for his approval of a blanket guarantee for Bank Century.

"Those ministers came to ask for my agreement but of course I didn't agree," he said.

Earlier in the day, Kalla said that he was not informed of the plan to bail out Bank Century until four days after it was declared to be a bank that had failed systematically on Nov. 25, 2008.

At the time, the failure was reported to Kalla by former finance minister Sri Mulyani Indrawati and then Bank Indonesia governor, Vice President Boediono.

Kalla acknowledged that he was confused about the decision to bail out Bank Century because the government had not made that decision. Furthermore, when Bank Century was reported to have failed, Kalla said no statement was made to indicate that the closure of Bank Century would affect other banks. (fss)