Indonesia's banking watchdog has found irregularities in the letter of credit (L/C) business of the troubled Indonesian bank, Bank Century.

The Supreme Audit Agency (SAA) has also made serious charges against Indonesia's central bank, saying it ignored L/C and other irregularities.

Credit crunch

The SAA says Bank Indonesia deliberately used every means to underplay irregularities and fraud at struggling Bank Century.

The irregularities and frauds were apparently aimed at hiding losses incurred as a result of Bank Century's poor investment and banking strategies, which were revealed by the credit crunch.

Violations ignored

As well as L/C irregularities, the official auditors say the central bank apparently ignored Bank Century's purchase of dubious foreign-denominated securities and interbank loans.

The SAA reckons the bank's violations date back well before the credit crunch, perhaps to as long ago as 2004.

The auditors say the central bank knew of Bank Century's violations between 2005 and 2007, but chose to impose no sanctions.

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