Source: The Jakarta Post (24-11-2008)

Aditya Suharmoko and Rendi A. Witular ,  The Jakarta Post ,  Jakarta   |  Tue, 11/25/2008 11:49 AM  |  Business

Ailing Bank Century resumed operations Monday, as Bank Indonesia launched a massive investigative audit to detect any violations of banking regulations that may lead to criminal prosecutions.

Bank Century's headquarters in the Senayan complex in Central Jakarta appeared quiet Monday morning with only a small group of customers waiting to withdraw their money, easing concerns of a bank run.

Nevertheless, the bank set a maximum withdrawal limit of Rp 50 million (US$4,350) until its coffers were filled with a Rp 1 trillion cash injection from the Deposit Insurance Agency (LPS) in the afternoon.

"We had to limit the amount of withdrawals so that every depositor could collect their money," said a Bank Century official who asked not to be named.

The bank has refused also to conduct any foreign currency transactions for the time being.

Financial planner Dwi Melia, 32, who came to Century to collect a term deposit, which matured Monday, is fearing the worst: She said she planned to move her money to other banks despite the government takeover.

"It (Century) is supposed to be safe after the takeover," she said. "But I'm not taking any chances."

Another customer, Dwi, who had term deposits in rupiah and U.S. dollars, said her dollar deposit was returned in rupiah as the bank was unable to transfer her money in dollars. She said she had no objection to receiving rupiah.

However, some customers still trusted in Century because of its competitive edge in certain services.

Amelia, who was drawing down an equivalent of $1000, said she remained confident in the bank, despite its attached risk, because of its services in foreign currency transactions.

Hadidjaja, a National Police detective, said he remained upbeat about his $10,000 deposit because he had a lot of faith in the government and the LPS.

Century has been under the management of the government-sanctioned LPS since Friday, after the bank's capital adequacy ratio (CAR) plunged to negative 2.3 percent from around 18 percent as of September. The CAR is a gauge of a bank's health, with the mandatory minimum set at 8 percent.

The LPS has put in place a new management team to revive Century before selling it to potential investors.

"The new investors will deal with the LPS. Existing Century shareholders are no longer eligible to handle the bank," LPS president commissioner Rudjito said.

Bank Indonesia (BI) deputy governor Muliaman Hadad said the LPS would have three years, with an extension of two years, to fix Century, although there was some optimism the LPS would be able to sell the bank within six months.

Meanwhile, BI deputy governor Siti Chalimah Fadjrijah said an investigative audit into Century was underway to identify any breaches that could end up in criminal prosecutions.

"The law enforcers will follow up on the results of the investigation," she said.

BI has demanded Century's controlling shareholders Rafat Ali Rivsi and Hesham Alwarraq, representing First Gulf Asia Holding, and businessman Robert Tantular, return bank assets worth $123 million parked in Singapore and the United Kingdom.

The Century collapse has been attributed by BI officials to an "inherited problem" resulting from the imprudent purchase in 2002 of high-risk notes worth $225 million. On Oct. 30, Century defaulted on some $56 million in loan payments to replace the notes.

The default triggered a run on deposits by Century's major corporate depositors, jeopardizing the bank's sustainability.