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December 10, 2008

Indonesia’s central bank unit declared bankrupt

Indonesische Overzeese Bank N.V. (Indover), the Netherlands-based unit of Indonesian central bank BI, has been declared bankrupt by a Dutch court, the national Antara News Agency quoted the BI governor Boediono as saying on Tuesday.

"On December 1, 2008, Indover Bank's administrator submitted a bankruptcy application to the court and it seems the court has met the request. So, Indover Bank's bankruptcy is based on Dutch laws," Boediono said.

He added that the central bank was still waiting for the process to complete before taking any measures. "We have yet to decide what to do to secure our interests, both those of BI and of Indonesia," he said.

BI had invested 53.9 billion rupiah (about $4.69 million)into Indover, which in the last couple of years has been registering losses. Indover has subsidiaries in Singapore and Hong Kong.

A court in Netherlands began to freeze Indover's operations on October 7, after the bank failed to honor obligations worth $92 million. The Indonesian government had previously sought a 546 million euro bailout for the ailing bank. But BI announced on Oct. 31 that it would let Indover fold, after failing to execute a planned bailout due to a failure in getting the approval from the House of Representatives (DPR) until October 30, which is the deadline set by the Dutch authorities.

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