JAKARTA, KOMPAS.

com — Former Bank Indonesia governor, who is now vice

president, Boediono, has prepared a 13 page chronology report. The report was officially
submitted to the Century inquiry committee chief, Idrus Marham, before Boediono gave
his verbal testimony by answering the questions of the committee members, Tuesday, at
the House of Rep. building, Jakarta.

In the report he stated the chronology of the situation encountered by Bank Indonesia,
begun when he started his term on May 22, 2008. He called the report as the
"development prior to the Century Bank case fiasco". Boediono's chronology is as
follows:

The first few months of 2008, due to a number of of Bank Indonesia (BI) leaders and
officials being implicated in corruption cases, the situation and morale in BI were
affected, and eventually its performance too. Bluntly, there was a demoralization among
the BI employees. When there was a change of governor in May 2008, resolution for this
matter was urgent.

I (Boediono) won't state the details of the measures I took during those months, but they
comprised of: (1) improving the internal regulations in BI that tended to be 'corrupt'
according to the suggestion of the Corruption Eradication Commission, (2) replacing and
repositioning of officials, especially in bank supervision, and (3) intensive
communication between employees to uplift their spirit and morale.

While taking those measures, the most heavy crisis befell the world that culminated in the
closing of the Lehman Brothers in mid-September 2008. This caused chaos and panic in
the global finance market. In various countries the flow of funding and credit was
stopped, and daily transactions and economic activities were disrupted.

In many developing countries, including Indonesia, there was a massive outflow of funds.
The capital outflow in Indonesia was more severe because for other countries in this
region there was a blanket guarantee, while Indonesia didn't have one. The value of USD
on November 24, 2008 leaped to Rp. 12,700 per USD. The BI reserves was rapidly
depleted because BI had to provide for at least part of the increasing requirement for
USD in the market. Between August to December, 2008, the BI reserves suffered a heavy
blow to hold the currency from going wildly out of control. In the end, the reserves lost
USD 50.6 billion by October 2008.

Because of that fund outflow, the liquidity in the country was low and banks had
difficulties in managing their flow of funds. In October 2008, major state-owned banks
asked for a Rp. 15 trillion liquidity support to cover for their shortages. But the worst
effect was for small to medium scale banks.

The savings from the people or other third parties in small banks were withdrawn since
September 2008, they were moved into bigger banks. Some customers even withdrew
their savings and kept them in safe deposit boxes because they were worried that the
banks would be closed.
The liquidity problem for middle and small scale banks was exacerbated because one of
their most reliable source of funding, which was the funding between banks, stopped. The
money market between banks was stuck.

Coinciding all that, are signs of decline for bank asset quality that resulted in a decrease
in the capital that we've painstakingly tried to build up since the crisis handling of 1997-
1998. The value of marketable securites owned by banks, including government
securities, flopped dramatically, causing much loss and decreasing the capital adequacy
ratio of banks.

The situation became even more dire because during those few months there were rumors
that a growing number of banks were having difficulties. The bank customers' trust was
shaken and the situation was more than threatening, it was explosive. Perhaps you may
recall a market analyst from a security firm who was detained by the National Police
under the charge of spreading malicious rumor through an email that might trigger panic.
Even a small trigger could cause a crisis.