Private Eye, No. 985 17 September, 1999 In The City "You cannot expect this bank to be the policeman of the world." So declared chairman Sir William Purves at the 1995 annual shareholders' gathering of Midland Bank, now HSBC. Sir William, who had been out east a long time and had seen more than a few strange things, was being quizzed about the bank's business in Indonesia. His dismissive reply took its cue from successive British politicians and business leaders. But the real reason was that business was booming. The three decades which was the dictator Suharto, his family and cronies steal billions while illegally annexing East Timor and murdering, torturing and repressing thousands of its and Indonesia's citizens were good times for not just Britain's arms manufacturers but also British banks whose loans helped fuel the regime. Growing evidence of the Suharto clique's corruption and kleptomania was no disincentive. By the time Suharto fell in May 1998 foreign banks were owed a staggering $80bn by Indonesian companies, banks and institutions. Much of this lending was to banks, companies and joint ventures in which the Suharto family had substantial interests. They amassed a fortune estimated at up to $10bn while Indonesia was receiving billions in international aid for its poor! Britain's share of this orgy of lending to one of the world's greatest kleptocracies and bloodiest dictatorships was over $3bn. The banks would say that they were only following the lead of international institutions such as the American dominated International Monetary Fund and the World Bank. For throughout the Cold War and beyond western powers shut their eyes to Suharto's corruption and the brutality of his generals, taking the line encapsulated almost a century ago by US president Teddy Roosevelt: "He may be a sonofabitch but he's our sonofabitch." Until the 1997 crash wiped the smile off the face of the Asian tiger economies banks fell over themselves to lend. This caused a serious rethink because suddenly Indonesia adopted a "can't pay, won't pay" policy which forced a rash of bad loan write-offs that severely dented profits and prompted a lack of enthusiasm for new loans. But there was still banking business to be done in Indonesia even if the killing went on in East Timor and Suharto had merely been replaced by one of his closest associates. "Willie" Purves's sensitivity about HSBC's business in Indonesia is understandable. Because of its Hong Kong roots HSBC had the biggest British presence there - more than $1bn in loan exposure, nine branches, 800 staff. Until the crash Indonesia and Suharto had been very good for HSBC. They had also been good to Standard Chartered which was reckoned to have a loan exposure close to $1bn. That number is all set to increase under a deal whereby Standard Chartered is due to rescue insolvent Bank Bali from which $70m was hoisted to boost president Habibie's Golkar party. No wonder the bank appeared unperturbed last week as the ethnic cleansing increased in East Timor and thousands were butchered. "We are taking a three to five year view," a bank spokesman told the Daily Mail. "East Timor is a complicated situation. There are no circumstances in which it could cause us to leave Indonesia." Indeed it has never prevented other British banks from fighting for Indonesian business. Barclays had a substantial presence as indicated by a loan exposure of £300m. In 1996 its BZW offshoot helped provide $410m for a copper smelting project. NatWest also joined in. Its exposure was almost £200m. So too did Royal Bank of Scotland and merchant bankers Schroders which had loans of $40m. But then they can point to encouragement from visiting Tory ministers eager to ensure British banks grabbed their share of an estimated £600m privatisation bonanza. British banking interests were no doubt also to the fore when Habibie chatted to chancellor Gordon Brown during a visit to London weeks before he was handpicked to replace his patron. British banks can also point to the fact that Britain was not the biggest player in Indonesia. That dubious privilege went to the Japanese banks who are still owed $16bn. Next up are German banks with $6bn led by Deutsche Bank, Dresdner, Commerzbank and Berliner. American banks' (Citibank, Bank of America, Chase Manhattan, BankBoston) $3bn exposure is similar to that of their British rivals. After that follow the French (Banque Nationale de Paris, Credit Lyonnais) and the Dutch (ABN-Amro) plus the Australians (ANZ). Needless to say the governments for all these countries have suddenly discovered Indonesia's rulers are untrustworthy tyrants who can only be restrained by threatening to turn off the financial tap which has been wide open for years. But whatever the political rhetoric, as Standard Chartered openly admits, the bankers will still be there because the banking business is about money not morality. Indonesia is merely the latest example after Slobodan Milosevic and the billionaire pilots of Russian flight capital that the successors to those who financed Hitler have never found a dictator they did not like or with which they believed they could not do profitable business.
