Last week, Rudy Ramli, former president of Bank Bali, told a parliamentary hearing into the affair that the UK investment bank colluded with the Indonesian Bank Restructuring Agency (IBRA) in nationalising Bank Bali to edge out the bank's management. Standard Chartered has denied this.
Standard Chartered agreed with the IBRA to pay pounds 86m for a 20 per cent share in Bank Bali, more than twice its original offer made in April for the controlling stake. But the scandal is undermining confidence in Indonesia's programme to get its banks up and running again by highlighting a lack of openness at the Indonesian central bank.
Indonesian opposition parties are claiming that Bank Bali paid $67m (pounds 41m) to the governing Golkar party to help recover loans at banks closed by the government. The payment only came to light when Standard Chartered did its due diligence study in July to buy the stake in the bank.
A spokesman for Standard Chartered said that Indonesia's troubles in East Timor were unlikely to affect its long-term plans in the country. "We are used to difficult situations like those in Indonesia. It has been on the brink of a civil war for a long time. But our long-term view of the country, say over the next four or five years, is economically and politically positive," he said.
Standard Chartered has been forging ahead with purchases of beleaguered banks in Asia, hoping to cash in on the economic recovery in the region. Last week it secured a deal to buy Thailand's Nakornthon bank for $314m after two years of negotiations.
It has also been rumoured that Standard Chartered wants to buy the Philippines' AsiaBank.