Regulatory changes after bailout

“The government, together with parliament, will propose to draw up and to revise regulations related to the monetary and fiscal sector,” Djoko Suyanto, the security, legal and political affairs minister told reporters after meeting President Susilo Bambang Yudhoyono.

He did not elaborate on how the regulations would be revised.

Earlier in March, parliament voted for a criminal investigation of Finance Minister Sri Mulyani Indrawati and Vice President Boediono – two of the president’s top reformers – over the rescue of Bank Century, a small lender, in 2008.

Indrawati and Boediono both defended the need to bail out Bank Century because of the risk its collapse could spark a panic in Indonesia’s financial markets at the height of the 2008 global crisis.

President Yudhoyono defended Indrawati and Boediono in what was widely seen as an attempt by powerful business and political groups to discredit and oust the two reformers, both of whom are respected for their efforts to crack down on corruption, attract investment, and spur economic growth.

However, the $720m rescue of Bank Century did raise concerns about the central bank’s role as a regulator.

Suyanto said President Yudhoyono had ordered the police, the attorney general, and the Corruption Eradication Commission (KPK), to investigate any indication of corruption and banking crime related to the Bank Century case in accordance with the law, adding that both the finance minister and vice president would be presumed innocent until proven guilty of any wrongdoing.