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Indonesia central bank to rescue unit n Netherlands


October 25, 2008

Indonesia central bank to rescue unit n Netherlands
Indonesia's central bank may bail out a failed subsidiary in the Netherlands to avoid a possible sovereign credit rating downgrade, lawmakers said on Friday, in a deal that local media estimated could cost nearly $700 million, reported Reuters.

A Dutch court in early October froze assets and liabilities of Indonesische Overzeese Bank NV (Indover), a subsidiary of Bank Indonesia that is active in the interbank market, at the request of the Dutch central bank (DNB) amid the global credit crisis.

An Indonesian parliamentary commission has agreed to a proposal to rescue Indover, officials said on Friday, adding that details of the measures are still being discussed.

"The parliament has given its approval. We have done the calculation. That is the cheapest way" to deal with the matter, central bank governor Boediono told reporters on Friday.

Members of the commission said the central bank regards the rescue as critical for its credibility and to prevent downgrades of the country's sovereign ratings which are still below investment grade.

Local media reported that the central bank had submitted several options to rescue Indover, including injecting 546 million euros ($691 million) into Indover.

Boediono declined to comment on the amount required for the rescue.

But Endin Soefihara, deputy head of the finance and banking commission, told reporters any decision on the rescue amount would "need further discussions and approval by parliament."
Under current central bank regulations, Bank Indonesia is barred from conducting activities outside its monetary role and has to divest business units. Divestment of Indover had been slated for early 2009. ($1=.7899 Euro)

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