How Soros broke the Bank of England

i
How Soros broke the Bank of England
by Sando Sasako
Jakarta, 31 July 2017
Last update: 30 September 2017
This section is a part of book titled by
“Asset Bubble, Bank Rakyat Indonesia, and Satellite Business in Indonesia”.
You may cite the content by using this style, or else:
Sando Sasako. Asset Bubble, Bank Rakyat Indonesia, and Satellite Business in Indonesia.
How Soros broke the Bank of England (pp.31-45). Serabdi Sakti, Jakarta, September
2017.
You may contact the author through
Email: sandosako @ yahoo.com
Mobile: +62 812 8056 516
Contents
Contents.................................................................................................................................................i
List of Tables.........................................................................................................................................i
List of Figure.........................................................................................................................................i
How Soros broke the Bank of England................................................................................................1
The Exchange Rate Mechanism.......................................................................................................3
Blaming the Bundesbank .................................................................................................................5
The German’s Hyperinflation Experience .......................................................................................7
Thanking the Bundesbank................................................................................................................8
The Gold Standard and Bretton Woods System.............................................................................10
The Inflation Targeting: The Germany Experience .......................................................................11
The Inflation Targeting: The UK Experience ................................................................................13
List of Tables
Table 6 – The currency basket of ECU and euro, 1979-1998..............................................................1
List of Figure
Figure 20 – ERM weighted mean and German inflation rates, 1971-1993 .........................................3
Figure 21 – ERM weighted mean and German inflation rates, quarterly, 1971-1993.........................3
Figure 22 – Overnight and long-term interest rates in Germany, 1970-1997......................................5
Figure 23 – Overnight and long-term interest rates in the UK, 1980-1997 .........................................5
Figure 24 – GBP/DM and UK base rates, 1992...................................................................................5
Figure 25 – GBP/DM, 1990-2005........................................................................................................5
Figure 26 – The inflation in the UK, 1270-1991..................................................................................8
Figure 27 – Inflation targeting, unemployment, and economic growth in Germany, 1970-1997 .......9
Figure 28 – Inflation targeting, unemployment, and economic growth in the UK, 1980-1997...........9
Figure 29 – The US debts and its gold reserves, 1917-2012..............................................................10
Figure 30 – The US debts & its limit and gold price, 2000-20170317..............................................10

Sando Sasako
ii
Figure 31 – Inflation rates in Germany: Target vs Actual, 1970-1997 ............................................. 11
Figure 32 – Inflation rates in the UK: Target vs Actual, 1980-1997................................................. 11
Figure 33 – Inflation rates in Germany: Target and actual, 1970-1997 ............................................ 12
Figure 34 – GBP/USD, 1980-1997.................................................................................................... 12
Figure 35 – The UK Phillips correlation in the 20th century: Inter-war era, 1926-1935.................. 13
Figure 36 – The UK Phillips correlation in the 20th century: Post-WW2 era, 1961-2004 ............... 13
Figure 37 – Monthly inflation rates in Germany, 199201-201707.................................................... 14
Figure 38 – Monthly inflation rates in the UK, 198901-201708....................................................... 14
Keywords:
asset bubble, bet against the market, short position, long position, ERM exit, black wednesday, white
wednesday, golden wednesday, creeping inflation, interest rates, sterling forced devaluation, inflation
targeting, currency raiders, hyperinflation, bretton woods, gold standard, monetary targeting.

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1
Follow the money. The simple instruction that has been exploited to connect the dots that appear to
be randomly distributed and scattered. There should be the beneficiaries of some events that appears
to be random and unrelated, at least to finance the operations of the accomplices. Once the names
harvested, time, place, events, and how the systems operated would present themselves.
There should be the head, the core team, facilitating teams, supporting teams, and lastly, the crowds
and herds. Let’s mention the names, starting with George Soros, Quantum Fund, Quantum group of
funds, and clients (in 4 Netherlands Antilles-domiciled pools). Some individuals worth mentioned
were Bruce Kovner of Caxton Corp. and Paul Tudor Jones of Jones Investments. Kovner was claimed
to make a profit of $300m and the assets increased to $1.6b. Jones was claimed to have a profit of
$250m and the assets increased to $1.4b.
There were also US banks with big foreign exchange operations, gaining of EBT of more than $800m
in 1992q3. The amount cited was more than the normal earnings in a quarter from trading currencies.
The notable crowds from those US banks were Citicorp, J.P. Morgan, Chemical Banking, Bankers
Trust, Chase Manhattan, First Chicago, BankAmerica. Citicorp and Bankers Trust were claimed to
profit of $200m apiece pretax.
To win his bets against sterling, Soros staged a complex play involving a lot of financial instruments
available in the market. Short the weakest currencies, through excessive borrowings (say lira) to buy
the strongest currencies (either DM, USD, or elses) at fixed rates. In the case of sterling, Soros made
heavy borrowings of £6.5b in which were converted into DM and French francs.
Table 1 – The currency basket of ECU and euro, 1979-1998
Table – The currency basket of ECU and euro, 1979-1998
ISO
Period 19890921-19981231 3)
19840917-19890921 2)
19790313-19840916 1)
Currency Value Weight (%) Value Weight (%) Value Weight (%)
DEM German Marks 0.6242 31.915 0.719 32.08 0.828 32.98
FRF French Francs 1.332 20.306 1.31 19.06 1.15 19.83
GBP British Pounds 0.08784 12.452 0.0878 14.98 0.0885 13.34
NLG Dutch Guilders 0.2198 9.87 0.256 10.13 0.286 10.51
BEF Belgian Francs 3.301 8.183 3.85 8.57 3.80 9.64
ITL Italian Lira 151.8 7.840 140 9.98 109 9.49
ESP Spanish Peseta 6.885 4.138
DKK Danish Krones 0.1976 2.653 0.219 2.69 0.217 3.06
IEP Irish Punts 0.008552 1.086 0.00871 1.20 0.00759 1.15
PTE Portuguese Escudos 1.393 0.695
GRD Greek Drachmas 1.44 0.437 1.15 1.31
LUF Luxembourg Francs 0.13 0.322 (*) (*) (*) (*)
Source: Werner Antweiler, European Currency Unit (ECU): A Brief History of the ECU, the Predecessor of the
Euro, The Pacific Exchange Rate Service, Sauder School of Business, University of British Columbia,
Vancouver, Canada, 20110119. http://fx.sauder.ubc.ca/ECU.html
Notes: 1) Since the Belgian and Luxembourg francs were in a currency union, the ECU basket values are
combined and shown only for Belgium. Weights are evaluated at central parities on 19790313.
2) Weights are evaluated at central parities on 19840917.
3) 9 of 11 currencies were irrevocably fixed during the period of 19980503-19981231. Weights are evaluated at
the prevailing exchange rates on 19981231.
Once lira fell against the DM, you can buy more lira for a DM to repay your lira borrowings. As
lesser DM was used and converted to a more lira, the remaining DM is your profit. In September
1992, to have a DM, you were required to have at least ₤765. Four weeks later, it took ₤980 to buy a
DM. The price difference is your profit of 28% in a 4-weeks of time.
His rep sheet made Soros earn to borrow on a margin of 5% and get 20:1 leverage. By surrendering
$50m in cash, Soros can borrow a fund of $1b. The 28% profit margin of $1b equals to $280m. Such

Sando Sasako
2
profit hadnot included the play in futures, options, stocks, bonds, and others. The real money is not
earnt on and through a single way, one-sided.
Some double-dips need to be taken as a precatious and a hedge if things are not working as intended
and walking sideways, or even backfired. Some strangles and straddles surely attract the flocks and
the herds to join the parades. To increase the pressure on some currencies, some leverages make the
trades worth millions, and even billions, of dollars. Puts, calls, other options and forwards can be
exploited to build up and leverage their positions.
The Black Wednesday was followed with a devalued of sterling by 10%, but some rallies in the rise
of currencies (by 7%) and bonds (by 3%) of both Germany and French, and London stocks by 7%.
Since early October 1993, Soros began to liquidate his hedge substantially. To cover most of his short
position in sterling, he had bought pounds and sold marks. Soros was also known to have bought
British shares worth £350m.
Although Soros earnt the title, people sometimes forget who really are the avant garde and the master
mind of all. Following the Black Monday in 1987, Andy Krieger of Bankers Trust crashed the NZD
after shorting it by hundreds of millions of dollars. The exceeding sell orders against the supply of
NZD was aggravated and exacerbated by lack of currency in circulation made kiwi tumbling down.
The kiwi government later pushed BT to expel Krieger, just to join Soros.
The second name worth to name as Soros’ best aide was Stanley Druckenmiller. His first long game
on DM had pushed the returns of Quantum Fund to the level of more than 60%. The first bet was
placed soon after the fall of Berlin Wall. The initial bet of multimillion-dollar on a future rally was
increased by Soros to the purchase of DM 2b. The second bet was placed when his boss was so busy
to break the BoE.

3
The Exchange Rate Mechanism
Andrew Weisman of Crédit du Nord spotted the weakest links of structure, foundation, and operation
of how the European ERM was set, built, and established. The ERM was based on the political sense
of the European leaders committed to the European Community, but not based on any economic
sense. Crédit du Nord was a subsidiary of Paribas since 1972 until it was acquired by Société Générale
in 1997.
The ERM was set in 1979 by the then-members of the European Economic Community (EEC) to
keep the various European currencies relatively stable against one another. The allowed deviation of
sterling by 6% was applied also for Italian lira and Spain currencies; whilst DM, French franc, the
Belgian franc, and the Dutch guilder were allowed to fluctuate by 2.25%.
The UK entered the ERM in October 1990 with the rate of DM 2.95 a pound, and was permitted to
fluctuate by 6%. As the exchange rate gets to the bottom of permitted range of 2.778 DM to a pound,
the British Government should intervene. According to the Basle-Nyborg agreement, Bundesbank
would defend exchange rates, provided that members of the system made the necessary interest rate
adjustments to protect their currencies.
The Bundesbank’s promise to help the troubled exhange rates was the second assumption within the
Basle-Nyborg agreement; whilst the first one was also a promise of Germany to have low inflation
and interest rates. Such agreement was the last realignment in 1987 leading to the revisions of the
EMS arrangements. Since its inception in May 1979 to January 1987, there were 12 realignments of
ERM-parities, largely due to cost- and price-differentials; but none afterwards up to 1992.1
In 1992, according to Rahul Mittal,2
following German reunification, the conditions of UK’s within
the ERM were not favourable as UK’s inflation was 3x of Germany, even with interest rates at 15%
which was (much) lower if compared with higher interest rates offered to DM. According to Alioth
LLC, the UK composite price index (CPI) in 1992 was 546.4%.3
Figure 1 – ERM weighted mean and German inflation rates, 1971-1993
Figure 2 – ERM weighted mean and German inflation rates, quarterly, 1971-1993
Chart – ERM weighted mean and German inflation
rates, 1971-1993
Chart – ERM weighted mean and German inflation
rates, quarterly, 1971-1993
Source: Ann C. Chalstrom, "Inflation in the European Community: A Study Before and After German Unification"
1994. Honors Projects. Paper 46. Illinois Wesleyan University. http://digitalcommons.iwu.edu/econ_honproj/46
The ERM should and will work as long as 2 conditions are satisfied, that is similar interest rates and
inflation. On a broader scale and macro-level, the 2 conditions require strict and highly coordinations
and disciplines on economic policies across the 11 countries implementing the ERM. Differences in
those 2 rates will cause some strains and stress on the system.
1
Moniek Wolters, The 1992-1993 ERM Crisis, Erasmus Student, http://bit.ly/2neyxf3.
2
Rahul Mittal, A History of Finance – Black Wednesday, 20120413, http://bit.ly/2x08OMl
3
Alioth LLC, UK inflation rate in 1992: 3.74%, http://bit.ly/2eWUxI9

Sando Sasako
4
At that time, the governments and central banks only know one thing to ease and release the pressure,
that is to buy and support the weakening currency against speculators and currency hedgers, directly.
The cash showers to the rigged and intended financial pressures wrecked the ERM, and pushing the
UK to leave the ERM.
The Black Wednesday of 16 September 1992 had pushed the BoE to exchange its foreign reserves of
$24b to defend sterling; whereas Soros’ fund sold short more than $10b in pounds that day. Within
30 minutes after the markets in London opened, BoE had spent £300m twice, and an additional £400m
in the next 10 minutes. By mid-morning, the sterling buying value rose to £2b an hour.
The move to defend sterling costed the UK Treasury by £3.4b. The interest rate offered by the BoE
for that day peak at 15%, but remained at 10% on the following day. Some degree of disappointments
rose amongst the UK officials as none of other ERM members wanted to come and provide the
cavalry, particularly the Bundesbank, to help and assist the BoE to defend sterling.
At the conference call, they spoke their own language, not English. Some nationality concern became
the ultimate issue, then. Such gesture should be easy to be translated. Bundesbank appeared to favour
for the BoE to devalue sterling as the UK government was deemed to have no confidence and ability
to stabilise its currency.
While on the eve of that day, the news wire cited the comments of Helmut Schlesinger as the President
of Bundesbank, that propping up the UK currency at a higher exchange rate is not worth of German
taxpayers' money. Some had praised Soros and aides to expel the UK from the ERM and devalue the
sterling.
The event had forced the UK to renew and revive its economic growth policy and succeeded to lower
the inflation and unemployment rates up to 1997. The positive reversal following the ERM exit led
to some renaming of Black Wednesday to White Wednesday or Golden Wednesday.
The harsh realm following the entrance of the UK into ERM had made people call the ERM as the
Eternal Recession Mechanism. It was due to the economic recession endured by the Brit during the
early 1990s. The weaker economies surely affect their currency valuation. With higher inflation rate,
the ever high interest rates failed to help the UK making sterling attractive, but the devalued ones.
The lesser foreign currencies mean more sterling that sufficient enough to attract ‘the unemployed’.
Politicians and central banks were bet to fail to maintain the overvalued and overpriced sterling
against the interests of European unity, particularly the DM. On the other front, GBP was also under
pressure against the rapid depreciation of USD as most Brit’s exports were priced in USD.
The UK was also under pressure against the double deficits, that is its current account balance and its
government budget balance. The event also marked the shift of UK’s monetary policy to inflation
targeting, including the involvement of BoE to measure, calculate, and analysis of inflationary trends
and pressures.

5
Blaming the Bundesbank
September 1992 marked sterling as the second currency that was forced to be devalued and lost a
sixth of its value against the DM. Two months before, it was lira that took the first hit and blow. It
was late summer of 1992. Other remaining currencies within the ERM were also under renewed and
constant speculative attacks until 2 August 1993 when EC monetary officials and finance ministers
agreed to widen the ERM bands from 2.25% to 15%, but the DM and Dutch guilder.
Some put the blame on Bundesbank’s policy to jack up the discount rate to 9.75%, its highest level
since 1931, as a prompt response to the event of higher than usual inflation in the summer of 1992.
Bundesbank began raising the short-term rates since the end of the 1980's. For the period of July 1992
to July 1993, German’s inflation was 4.8%, about twice of France and the UK. In October 1993, it
stood at 4.2%.4
During the last year of Schlesinger's presidency, Bundesbank had lowered its short-term rates in tiny
steps. Following the Italian lira devaluation of 7% on 14 September 1992, Bundesbank reduced the
short-term lending rate from 9.75% to 9.5%. It was the first small cut in German interest rates in five
years.
Figure 3 – O vernight and long-term interest rates in Germany, 1970-1997
Figure 4 – O vernight and long-term interest rates in the UK, 1980-1997
Chart – Overnight and long-term interest rates in
Germany, 1970-1997
Chart – Overnight and long-term interest rates in the UK,
1980-1997
Source: BIS; in Mishkin and Posen, Inflation Targeting,
1997.
1997.
Figure 5 – G BP/DM and UK base rates, 1992
Figure 6 – G BP/DM, 1990-2005
Chart – GBP/DM and UK base rates, 1992 Chart – GBP/DM, 1990-2005
Source: Steven Drobny, Inside the house of money: top hedge fund traders on profiting in the global markets, John
Wiley & Sons, Inc., Hoboken, New Jersey, 2006.
The last cut was a half percentage point reduction to the level of 6.25% on 9 September 1993; whilst
its key money market ceiling was set at 7.25%. Yet, both rates were still more than twice of the Fed’s
rate. In the meantime, the long-term rates the German businesses paying for investment funds were
ranging between 6.5-6.75%. Some were slightly below 6%. The DM long-term rates were equal to
the Fed’s long-term rates, but were lower if compared with German’s neighboring countries.
4
Craig R. Whitney, Blaming the Bundesbank, 19931017, http://nyti.ms/2x2XqB4

Sando Sasako
6
The slow progress of interest rates reduction by the Bundesbank was not without reasons. Without
fanfare, the Bundesbank had spent DM 44b to defend sterling and lira. On the other front, Bonn had
made a deficit spending amounting to $140b, equal to 7.5% of GNP, either from the state, local, and
federal government.
With the public sector was soaking up 90% of the country's savings, it left next to nothing for job-
creating private investment. The reunification had become the justification for the Bonn to initiate its
3-year borrowing binge. As a result, the Bundesbank summoned Theo Waigel, the Finance Minister,
explaining the sliding of DM against USD and French franc on 17 June 1993.
To keep inflation under control and the mark strong, Bonn was asked to restrain its appetite for royal
spending. Waigel then stated his plan to cut federal budget by $12b in 1994, $15b in 1995, and $18b
in 1996; including bigger cuts in state and local government spending. The slashed unemployment
benefits and no salary increase for government employees revived German’s economy and the mark.
This in turn let Bundesbank to reduce its key short-term rate from 7.25% to 6.75% and the ceiling on
money market rates from 8.50% to 8.25% by the end of June 1993. By mid-July 1993, French francs
got a heavy selling worth billions against DM. To fend off the speculators, Banque de France raised
one its key interest rates from 7.75% to 10% overnight. It was the first since 1987.
Sensing blood in the water, the currency traders sold their francs. President Francois Mitterrand and
Prime Minister Edouard Balladur praised their stance to have a franc fort and standing as the heart of
European Community since its inception. By the end of the month, France and Germany were in open
conflict in regard to the lively and collapsing EMS.
On 29 July 1993, Bundesbank found out that as its coffers were already full of francs and other ERM
currencies as a standby purchase worth $37b, it could not reduce its short-term interest rates any
further, but leaving the discount rate at 6.75%. On the next morning, the Spanish, Portuguese, Danish,
and Belgian currencies were being dumped.
Afterwards, rally meetings of central bankers and finance ministry officials were taken place in Paris
and Brussels until Monday morning on 2 AM. They’d come to a decision to keep the Dutch guilder
and DM to stick on the old parity margins, a deviation of ±2.25% against each other. Whilst other
ERM currencies were allowed to fluctuate by ±15%.
The Bundesbank can be called upon to support the exchange rates of other ERM currencies that sank
below 15% of their assigned levels. Such move appeared to stamp an epitaph on the EMS tombstone.
In regard to such event, the UK Finance Minister, Norman Lamont, felt relieved and vindicated. Some
relax to the interest rates was believed to occur.
Eventually, the French, the Belgians, and many other monetary authorities did not immediately cut
the interest rates down, but keep aligning most of them to the DM. Later on, during his investiture as
presiding Bundesbank on 1 October 1993, Hans Tietmeyer didn't mince words regarding his duty to
abide the central bank's 1957 charter, that is to preserve and safeguard its currency, DM.
The perseverance not to the DM fire sale was also conceived and convinced by Jurgen Stark, the top
ranking German at the ECB. Stark resigned after the ECB keeps their intention to buy the bonds of
troubled countries. Stark insisted that when the ECB buys the bonds of Germany and other troubled
countries, an equivalent of money must be taken out of circulation.

7
The German’s Hyperinflation Experience
The refusal of Bundesbank to cut its interest rates by half was due to the harsh lessons experienced
by the Germany of hyperinflation in 1923, the Nazis, and WW-II. The lessons were taught, taunted,
and embedded on children’s education. The status as the losing-party in both world wars also made
Germany had to deal with its mess as a war-torn country.
The economic catastrophe of Germany after WW-I was due to its enormous reparations to France and
Britain totaling at 132 billion gold marks ($33b), in which only 50 billion gold marks ($12.5b) was
required to be settled. The economic collapse in 1931 allowed the Germany to suspend its reparation
for a year, and cancelled altogether in 1932 during the Lausanne Conference.
For the period of 1919-1932, total war reparations paid by the Germany was less than 20.6 billion
marks. It was exclusive of the scuttling of the interned German fleet at Scapa Flow, state property
lost in lands ceded to other countries, and the loss of colonial territories, totaling at 47.2 billion gold
marks.
In 1995, following reunification, Germany began making the final payments towards the loans. The
German’s promise in June 1953, known as the London Agreement, began to be realised. A final
installment of $94m was made on 3 October 2010, settling German loan debts in regard to war
reparations.
It was the final sum owed on bonds that were issued between 1924-1930 and sold to foreign (mostly
American) investors but then never paid. The installment was nearly 92 years after the Germany’s
defeat by the Allies. Debts cancellation was made by the new German Chancellor Adolf Hitler in
1933, following the cancellation of war reparations in the previous year.5
German’s Weimar hyperinflation began when the gold standard was suspended as a reference to add
and distribute the physical money through massive borrowings to finance the large costs of the
ongoing WW-I. It devalued the mark from 4.2 to 7.9 per USD. The following is some milestones on
mark hyperinflation to the USD during Weimar administration.
1914 mark was at 4.2.
1919, late mark fell to 48, as a result of the Treaty of Versailles.
1921, first half mark was at 90.
1921, June mark was at 330; it was due to the first installment of reparation worth 2 billion
gold marks, plus 26% of the value of Germany's exports.
1922, first half mark was stable at 320.
1922, June the cost-of-living index was 41.
1922, December mark was at 7,400; with the cost-of-living index rose to 685.
1923, 15 October Rentenmark (RM) 1 ≈ 1-trillion Papiermark. USD 1 ≈ RM 4.2.
1923, November mark was 4,210,500,000,000. US$ 1 ≈ 4.21 trillion marks.
1924, July mark in circulation was 1.2 sextillion (1,200,000,000,000,000,000,000).
1924, 30 August 1-trillion paper mark ≈ 1 new Reichsmark (ℛℳ) ≈ 1 Rentenmark (RM). USD 1
≈ RM 4.2 ≈ ℛℳ 4.2. RM use was valid up to 1948.
5
Claire Suddath, "Why Did World War I Just End?". Time World. Time. 20101004. http://ti.me/1B5jDHe

Sando Sasako
8
Thanking the Bundesbank
Figure 7 – The inflation in the UK, 1270-1991
Chart – The inflation in the UK, 1270-1991
Source: Robin Leigh-Pemberton, the Governor of Bank of England; The case for price stability, Quarterly Bulletin, Nov.
1992, pp.441-448.
How to appreciate the roles of Soros and Bundesbank on the harsh realignment of EMS was not
something easy to be understood. ERM and EMS, and its monetary unit known as ECU or euro, had
actually been implemented in April 1972, just before the Bretton Woods system completely collapsed
in 1973.
The snake exchange rate system allowed currencies within the EC (European Community) countries
to fluctuate by 2.25% around an exchange rate parity. Stable currency is required to facilitate the trade
of goods amongst member countries, reduce domestic inflation, and as a path to integrate the capital
markets, and eventually a monetary union.
In 1976, the snake mechanism shrank to a mini-snake as it left 5 countries to remain in the system,
that is West Germany, Denmark, and Benelux (Belgium, Netherlands, Luxembourg). A new system
emerged in 1979 as a fixed exchange rate with a band named by the ERM and ECU as the currency,
the basis of the divergence indicator.
Fast forward to the expel of sterling out of ERM, the artificially high and over value of sterling against
DM had pushed the UK to redefine its structure that spur economic growth. The forced devaluation

9
of sterling in September 1992 bottomed at DM 2.16 per £ in 1995, but to peak at DM 3.44 per £ in
2000. See Chart – GBP/DM, 1990-2005.
The rise of sterling was caused by two things that is the internal factors of the UK and external factors,
mostly the Germany economy. The stronger and revived UK economy was coupled with the negative
effects of euro integration suffered by the Germany and France, that is rising unemployment. The
sterling withdrawal from the ERM indeed humiliated UK Chancellor Norman Lamont and Prime
Minister John Major in the short-term, just to gain a long-term good.
Figure 8 – Inflation targeting, unemployment, and economic growth in Germany, 1970-1997 Figure 9 – Inflation targeting, unemployment, and economic growth in the UK, 1980-1997
Chart – Inflation targeting, unemployment, and
economic growth in Germany, 1970-1997
Chart – Inflation targeting, unemployment, and
economic growth in the UK, 1980-1997
Source: BIS; OECD; in Mishkin and Posen, Inflation
Targeting, 1997.
Source: OECD; in Mishkin and Posen, Inflation
Targeting, 1997.

Sando Sasako
10
The Gold Standard and Bretton Woods System
The collapsed BWS began when the US unilaterally disable the convertibility of USD 1 to 1/35 of an
ounce of gold bullion, vice versa, as of 15 August 1971. The pressures against and run on gold as the
standard to expand a country’s money began to surmount as the run on USD for gold could not be
coped by the Fed.
The BWS set the 44 member countries to fix their exchange rates to the USD within a band of 1%,
accordingly, at the same time. The BWS allowed the member countries to buy gold from the Fed by
USD35/ounce. As the trade accounts amongst countries are different, it surely irritates the countries
with the trade surplus.
This catapulted more countries to stockpiling US gold, but the Germany. The heavy run on the US
gold depleted its reserves to the level of 22% to ⅓ by 1970. The outstanding USD in 1971 was $152b,
while gold reserves held by the US was worth $52b. In the beginning of BWS, the US was believed
to keep the global gold bullion by ⅔ to ¾ (about 20,000 mt) as the reserves for USD kept in foreign
countries.
The continued US trade deficits made its USD currency became worthless in time, but the gold. The
worthless USD began when the US threw their money amounting to $9b for free of the total $12b
within the framework Marshall Plan. That did not include the $2b donation for Japan. By 1966, the
US grants to Europe peaked at $54.6b.
What appears to be free on the surface is actually against what really happens below the surface. By
printing and distributing the USD, the US has been throwing their inflation to the world.6
The gold
price set within the BWS framework was only valid for member countries, but not for the private
entities.
The devalued USD to the gold pushed member countries worldwide to keep gold as their reserves. In
1965, French president Charles de Gaulle threatened the US to convert its $1.5b reserves to gold.
Otherwise, France will withdraw from NATO, including the military bases in French territories. Other
countries such as Germany, Japan, and Canada just followed suit.
Figure 10 – The US debts and its gold reserves, 1917-2012
Figure 11 – The US debts & its limit and gold pr ice, 2000-20170317
Chart – The US debts and its gold reserves, 1917-2012
Source: Robert Parker, Why did the Bretton Woods
system fail?, 20161126, http://bit.ly/2jyaWYT
Chart – The US debts & its limit and gold price, 2000-
20170317
Source: David Chapman, Gold And U.S. Debt Limit:
Intertwined?, investing.com, 20170319,
http://bit.ly/2jAh1Ef
6
Robert Parker, Why did the Bretton Woods system fail?, 20161126, http://bit.ly/2jyaWYT

11
The Inflation Targeting: The Germany Experience
Inflation has been the most feared troublesome avoided by the Bundesbank. In order to do so, the
policy to control the money supply has been implemented on its strictest sense. At that time, the most
used indicator to watch, monitor, and observe closely was the physical printed money in circulation.
Once circulated heavily, Bundesbank is to attract the money back into the banking system.
Figure 12 – Inflation rates in Germany: Target vs Actual, 1970-1997 Figure 13 – Inflation rates in the UK: Target vs Actual, 1980-1997
Chart – Inflation rates in Germany: Target vs Actual,
1970-1997
Chart – Inflation rates in the UK: Target vs Actual,
1980-1997
Note: Original title: Annual and unavoidable (normative)
inflation. Unavoidable inflation is the targeted inflation.
In 1986, Bundesbank renamed the term as the rate of
normative price increase.
Note: Original title: RPIX inflation and targets. The
inflation targeting within 1-4% during Oct. 1992 to June
1995; shifts to a point target of 2.5% or the midpoint of
the range, indicated by the dashed line.
Source: Bundesbank; BIS; in Frederic S. Mishkin and
Adam S. Posen, Inflation Targeting: Lessons from Four
Countries, Working Paper 6126, National Bureau of
Economic Research, Cambridge, MA, August 1997.
Sources: BoE; BIS; in Mishkin and Posen, Inflation
Targeting, 1997.
The term used and had been implemented by Bundesbank for the period of 1975-1998 was monetary
targeting. It was defined as a monetary policy strategy that aims to promote price stability through
the intermediate goal of monetary growth.7
Following the implementation of euro since 1999, the
term was changed to inflation targeting.
With the usual instruments of monetary policy, inflation targeting brings only an indirect effect on
the level of prices. Later, inflation targeting is defined as a monetary policy strategy which seeks to
achieve the end goal of price stability in a direct way. Intermediate goals, such as a certain annual
growth rate in the money stock, are dispensed with.8
The basic ideas behind inflation targeting are twofold: first, to set the direction of monetary policy
publicly by announcing a target value for the inflation rate, and, second, to take account of the
uncertainties and time lags in the monetary transmission process by observing a range of data, and
not just one intermediate target.
To achieve the target, the two-pillar strategy in the area of monetary analysis (within the Eurosystem)
is to provide some comprehensive analysis on the indicators used by the Governing Council of the
ECB as the bases of its monetary policy decisions. It is to highlight the risks to price stability and the
needs for monetary policy action.9
The two pillars are the economic and monetary analyses. Economic analysis looks at short to medium-
term real economic indicators (eg potential output, wage development), while monetary analysis
looks at longer-term, monetary indicators (eg growth of the money supply). The information obtained
from each of the two pillars is cross-checked to ensure that no relevant information is overlooked.
7
Bundesbank, Monetary targeting, Deutsche Bundesbank – Glossary, 20140701, http://bit.ly/2xHfhix
8
Bundesbank, Inflation targeting, Deutsche Bundesbank – Service – I, 20170621, http://bit.ly/2wxi4pu
9
Bundesbank, Two-pillar strategy, Deutsche Bundesbank – Glossary, 20140701, http://bit.ly/2h9dDiG

Sando Sasako
12
Figure 14 – Inflation rates in Germany: Target and actual, 1970-1997 Figure 15 – GBP/U SD, 1980-1997
Chart – Inflation rates in Germany: Target and actual,
1970-1997
Chart – GBP/USD, 1980-1997
Source: Bundesbank; BIS; in Mishkin and Posen,
Inflation Targeting, 1997.
1997.
Note: Original title: Monetary growth and targets. The
shifts to a dashed line indicates the change in the
monetary aggregate targeted, from CBM (central bank
money stock) to M3
Note: Original title: Nominal effective exhange rate in
the UK, 1990=100
In the case of the UK withdrawal from the ERM, the Bundesbank kept persisting to reduce interest
rates by no more than 25 basis points were not without precedence. It was due to the billions of DM
that had been spent to rejuvenate the East Germany by the Bonn government and about DM 44b to
defend the sterling and lira by the Bundesbank.
By throwing more DM to the open international money market, Bundesbank refused to take greater
risks and the higher chance of the plummeting DM against the USD or other currencies. The tied
hands of Bundesbank were also aggravated by the presenting reality that the interest rates of DM had
been shooting over the unavoidable (normative) inflation (read: target) set at 2% since 1986.
Having presented over the choice between the inflation or the interest rates, Bundesbank prefers to
avoid higher inflation than the interest rates. It is due to the costs of paying the price of interests are
much cheaper, that having to pay the price of higher costs of inflation. The interests rates to pay is
measurable, either in the short-terms and/or longer-terms.
The effects of inflation can be rampant, chaotic, spreading, uncontrollable, and indefinite. As a result,
inflation has become the ultimate target for many operations, either market or monetary. Some time-
lags and higher level of uncertainty makes inflation is something that must be contained and settled
at their inceptions.

13
The Inflation Targeting: The UK Experience
Many have believed that higher inflation provides more profit that encourage the business to invest
more, raising the employment level, lowering the unemployment level, raising output. On the other
hand, lower inflation can mean that the business is to exploit the Five Forces theorised by Michael E.
Porter.
Figure 16 – The UK Phillips correlation in the 20th century: Inter-war era, 1926-1935
Figure 17 – The UK Phillips correlation in the 20th century: Post-WW2 era, 1961-2004
Chart – The UK Phillips correlation in the 20th century:
Inter-war era, 1926-1935
Chart – The UK Phillips correlation in the 20th century:
Post-WW2 era, 1961-2004
Source: Luca Benati, The inflation-targeting framework from an historical perspective, Monetary Assessment and
Strategy Division, Bank of England Quarterly Bulletin: Summer 2005. pp.160-168.
Competitive advantages can happen to either one or all sides, that is cost effectiveness to minimise
the overall costs; highly differentiated to maximise the price and profit; and speed to market as the
leading product innovator to exploit its position as the early bird. Yet, the inflation is not necessarily
confined with the increase of price of goods and services, inflation can be applied as the increase of
price of labour (wage).
The 3% inflation rate in the 1950s and 1960s were perceived as normal and just an ordinary monetary
phenomenon, and the necessary condition for stable growth of output and employment. The collapsed
BWS along with the oil supply shock in the 1970s catalysed the creeping inflation for the last 2
decades to more than trebled.
The adoption of some firm counterinflationary policies in the 1980s appeared least significant as the
average inflation for the period of 1970-1990 was much higher, if compared with the inflation rates
occurred the previous 200 years. See Chart – The inflation in the UK, 1270-1991. The withdrawal of
the UK from the ERM was perceived as outdated economic theory was implemented with flawed
policy implementation.
The relationship of higher inflation to lower unemployment was proven by the empirical evidence
provided Bill Phillips, the LSE economist himself, in mostly cited terms as Phillips curve: The rate
of increase in wages in the UK was inversely related to the rate of unemployment. When extended to
a longer term of observation, the correlation appears to be insignificant and deteriorated.
The culminated Black Wednesday was closely mirrored with the event of 20 September 1931, that is
when the UK decided to leave the gold standard. See Chart – The UK Phillips correlation in the 20th
century: Inter-war era, 1926-1935. The economics of post-WW-1 and/or inter-war was considered by
many to have a complete boom and bust cycle of the 1920s and 1930s.

Sando Sasako
14
Irving Fisher of the US and John Maynard Keynes of the UK drew the same conclusion: the instability
in the aggregate price level had been the main source of business cycle fluctuations. Yet the case for
price stability had been inadequately understood. Likewise how Leigh-Pemberton framed the analysis
that was not easy to comprehend as there were convoluted terms and not straightforward.10
Instead to provide the analysis linearly, Leigh-Pemberton made jumps and circles around the inflation
and never made the basis and fragments of the causality of inflation. The minced words provided by
Leigh-Pemberton made some irritating headaches to my thinking and raising questions. What’s wrong
with (this) Governor of Bank of England? What’s wrong with the Bank of England?
You’d google it and you’ll find, not one. The coverups, the failed war bond sale to finance WW-1,
the ultimate cashier for the UK government aka the UK Prime Minister and Chancellor; BoE cannot
provide the necessary and required euro for the British-based banks, but from the ECB worth €37b;
the involvement of BoE in the BCCI scandal in 1991; the wreck of Barings Bank as the Queen’s bank
that bankrupted by Nick Leeson in 1995.
Apart from the surfacing taints, BoE has some issues with the UK government regarding its function
as the King of the City of London, and mostly lack of competency of the people running and operating
the BoE. In 1987, the Blair government stripped its power to regulate and supervise the UK FSA. In
2010, George Osborne as the British Chancellor abolished the FSA and restore the regulation function
back to the BoE.
The troubled BoE, ONS, and others within the UK jurisdiction have in common is they’ve been using
their own definition regarding inflation and CPI. While international communities abbreviated CPI
as consumer price index, the BoE and other UK authorities define CPI as consumer price inflation
and/or composite price index.
They shy away to use, generate, and implement CPI of common international standard and practice.
Even worst, you’ll never find the availability of consumer price index, in terms of norminal inflation
rates, either on a monthly basis, month-on-month basis, and/or year-on-year basis, but the indiced
ones with some bases year and (heavy) adjustment(s). You’ll also be surrounded and overwhelmed
with the new and foreign terms such as RPI and RPIX, HICP (Harmonised Index of Consumer
Prices).
Figure 18 – Monthly inflation rates in Germany, 199201-201707 Figure 19 – Monthly inflation rates in the UK, 198901-201708
Chart – Monthly inflation rates in Germany, 199201-201707 Chart – Monthly inflation rates in the UK, 198901-201708
Source: inflation.eu Source: inflation.eu
10
Robin Leigh-Pemberton, the Governor of Bank of England (1983–1993), The case for price stability, Bank of
England, Quarterly Bulletin, Nov. 1992, pp.441-448.

Asset Bubble, Bank Rakyat Indonesia, & Satellite Business in Indonesia
Serabdi Sakti
Jakarta, August 2017
Sando Sasako
Asset Bubble,
Bank Rakyat Indonesia
&
Satellite Business in Indonesia
http://bit.ly/1S2Ibr
http://bit.ly/2wFoK9a

i
Contents
Contents ...................................................................................................................................... i
List of Tables ........................................................................................................................... vii
List of Figures........................................................................................................................... xi
Some Background.......................................................................................................................1
The Authentication and Authorisation....................................................................................2
How this report proceeds and gets distinguished....................................................................4
Asset Bubble...............................................................................................................................5
Excessive Liquidity.................................................................................................................7
Excessive Liquidity: The Aftermath.......................................................................................9
The Liquidity Effect..............................................................................................................11
The Limit of Excessive Debts...............................................................................................13
Inflation Management in Indonesia ..........................................................................................15
Market Liquidity in Indonesia ..............................................................................................17
Playing with Interest Rates ...................................................................................................19
The Money Markets in Indonesia .........................................................................................21
What To Do with Assets Bubbled?...........................................................................................23
The volatile sterling against the dollar and euro...................................................................25
The Special Drawing Rights.................................................................................................27
Yuan Internationalisation......................................................................................................29
How Soros broke the Bank of England ....................................................................................31
The Exchange Rate Mechanism ...........................................................................................33
Blaming the Bundesbank......................................................................................................35
The German’s Hyperinflation Experience............................................................................38
Thanking the Bundesbank ....................................................................................................39
The Gold Standard and Bretton Woods System ...................................................................41
The Inflation Targeting: The Germany Experience..............................................................42
The Inflation Targeting: The UK Experience.......................................................................44
The LIBOR Fixing....................................................................................................................46
The LIBOR Scandal..............................................................................................................49
The Magnitude of LIBOR Scandal.......................................................................................53
The Price of High Fines........................................................................................................56
Hundreds of trillions USD derivatives was exchanged daily ...............................................58
Central Banks: The Initiator and Keeper of Widespreading Asset Bubble Phenomena ..........60
How to Detect and Spot Asset Bubble..................................................................................63
Asset Bubble aka Accounting Frauds: The Causalities........................................................65
Asset Bubble aka Accounting Frauds: The Red Flags .........................................................66
The Asset Bubble of Wells Fargo.........................................................................................69
Shrinking the Asset Bubble ......................................................................................................73
The Demand..........................................................................................................................75
The Demand: To weaken, to stimulate, or to create .............................................................77
The Price...............................................................................................................................79

Sando Sasako
ii
BRI’s financial profile in briefs................................................................................................81
BRI’s Financial Highlights.......................................................................................................83
Cash Flow .............................................................................................................................86
Income Statement .................................................................................................................87
Balance Sheet........................................................................................................................88
Risk Management Policy..........................................................................................................90
Dividend Policy ........................................................................................................................91
Maturity Profile ........................................................................................................................92
Maturity of Fund Borrowings...............................................................................................95
Maturity of Loans .................................................................................................................96
Loan Profile ..............................................................................................................................97
Credit Risk Exposure..........................................................................................................103
Liability Profile.......................................................................................................................105
Financial Structure..............................................................................................................106
Third Party Funds Profile ...................................................................................................108
Bonds Issued.......................................................................................................................111
Financial Performance............................................................................................................112
The Total Assets .................................................................................................................112
Earning Assets ....................................................................................................................112
Third Party’s Funds ............................................................................................................113
Loans...................................................................................................................................113
Equity..................................................................................................................................114
Profit Making..........................................................................................................................115
Revenues.............................................................................................................................115
Operating Profit, Net ..........................................................................................................115
Earnings Before Tax...........................................................................................................116
Earnings After Tax .............................................................................................................116
Retained Earnings...............................................................................................................117
Profit Profile ...........................................................................................................................119
Stock Performance..................................................................................................................121
Market Capitalisation..........................................................................................................122
Share Price..........................................................................................................................122
Stock Trading......................................................................................................................123
Investors’ Preferences.........................................................................................................125
Financial Ratios ......................................................................................................................126
Stock price ratios ................................................................................................................126
Liquidity .............................................................................................................................128
Profitability.........................................................................................................................130
The Shareholders ....................................................................................................................134

iii
Subsidiaries.............................................................................................................................139
BRI Syariah.........................................................................................................................139
BRI Agro.............................................................................................................................140
BRI Remittance...................................................................................................................141
BRI Life ..............................................................................................................................142
BRI Finance ........................................................................................................................143
Associated Entities..................................................................................................................144
Transactions with Related Companies....................................................................................145
The Analysts ...........................................................................................................................151
Corporate Profile.....................................................................................................................152
Milestones...........................................................................................................................154
e-channels ...........................................................................................................................155
Branch and Regional Offices..............................................................................................155
Head Office.....................................................................................................................155
Special Branch Office.....................................................................................................155
Overseas Branch Offices ................................................................................................155
Regional Offices .............................................................................................................156
Office of Subsidiaries .........................................................................................................157
Banking Divisions...............................................................................................................158
Organisation Structure ............................................................................................................160
Management Profile................................................................................................................161
Board of Commissioners ....................................................................................................162
Andrinof Achir Chaniago ...............................................................................................167
(Mustafa Abubakar)........................................................................................................167
Gatot Trihargo.................................................................................................................168
Ahmad Fuad Rahmany ...................................................................................................168
(Ahmad Fuad).................................................................................................................169
Nicolaus Teguh Budi Harjanto .......................................................................................170
Adhyaksa Dault...............................................................................................................170
A. Sonny Keraf ...............................................................................................................171
Vincentius Sonny Loho ..................................................................................................171
Jeffry Jefta Wurangian....................................................................................................172
Mahmud..........................................................................................................................172
Secretary to the Board of Commissioners ..........................................................................174
Committees of BoC ............................................................................................................175
Nomination and Remuneration Committee (NRC) ........................................................175
Audit Committee.............................................................................................................175
Risk Management Monitoring Committee (RMOC)......................................................177
Integrated Governance Committee (KTKT)...................................................................178
Board of Directors ..............................................................................................................181
Suprajarto........................................................................................................................186
(Asmawi Syam) ..............................................................................................................186
Sunarso............................................................................................................................186

Sando Sasako
iv
Donsuwan Simatupang...................................................................................................187
Haru Koesmahargyo .......................................................................................................187
Kuswiyoto.......................................................................................................................188
Mohammad Irfan ............................................................................................................188
Priyastomo......................................................................................................................188
Randi Anto......................................................................................................................189
Sis Apik Wijayanto.........................................................................................................189
Susy Liestiowaty.............................................................................................................190
Indra Utoyo.....................................................................................................................190
(Zulhelfi Abidin).............................................................................................................190
Senior Executive Vice President (SEVP) Profiles..............................................................192
Irianto Sunardi ................................................................................................................192
Adi Setyanto and Bardiyono Wiyatmojo........................................................................192
(Saptono Siwi) ................................................................................................................192
Hexana Tri Sasongko......................................................................................................193
Supari..............................................................................................................................193
Agus Noorsanto ..............................................................................................................193
Corporate Secretary ............................................................................................................194
Investor Relations ...............................................................................................................194
Senior Executive Profiles ...................................................................................................195
Head, IT Planning & Development Division .................................................................195
Head, Investment Service Division ................................................................................195
Head, Risk Management Division..................................................................................195
Head, Corporate Development & Strategy Division......................................................195
Head, Outsourcing Management Division .....................................................................195
Head, International Business Division ...........................................................................195
Head, Micro Business Development 2 ...........................................................................195
Head, Micro Business Policy & Strategy Division ........................................................195
Head, Fixed Assets Management Property.....................................................................195
Head, Credit Risk & Analysis Division..........................................................................195
Head, SOE Business 1 Division .....................................................................................195
Head, Treasury Division.................................................................................................196
Head, Procurement Division...........................................................................................196
Head, Transaction Banking Division..............................................................................196
Head, SOE Business 2 Division .....................................................................................196
Head, Finance & Accounting Management Division.....................................................196
Head, Digital Banking Operation Division ....................................................................196
Head, Institutional Banking 2 Division ..........................................................................196
Head, Loan Program & Partnership Division.................................................................196
Head, General Business Division ...................................................................................196
Head, Agribusiness Division ..........................................................................................196
Head, Consumer Loan Division .....................................................................................196
Head, SME & Medium Business Division.....................................................................196
Head, Institutional Banking 1 Division ..........................................................................197
Head, Wealth Management Division..............................................................................197
Head, Restructuring & Recovery Credit Division..........................................................197
Head, Human Capital Services Division ........................................................................197
Head, Operation Center Division ...................................................................................197

v
Head, Corporate Secretary Division ...............................................................................197
Head, Credit Card Division ............................................................................................197
Head, Service & Contact Center Division......................................................................197
Head, Marketing Communication Division....................................................................197
Head, Satellite & Terrestrial Division ............................................................................197
Chief Learning Officer, BRI Corporate University........................................................197
Head, Human Capital Policy & Development Division.................................................197
Head of Regional Offices ...................................................................................................198
Head, Jakarta 3 Regional Office.....................................................................................198
Head, Malang Regional Office .......................................................................................198
Head, Bandar Lampung Regional Office .......................................................................198
Head, Palembang Regional Office..................................................................................198
Head, Surabaya Regional Office ....................................................................................198
Head, Pekanbaru Regional Office ..................................................................................198
Head, Jayapura Regional Office .....................................................................................198
Head, Aceh Regional Office...........................................................................................198
Head, Semarang Regional Office ...................................................................................198
Head, Medan Regional Office ........................................................................................198
Head, Yogyakarta Regional Office.................................................................................198
Head, Denpasar Regional Office ....................................................................................199
Head, Padang Regional Office........................................................................................199
Head, Manado Regional Office ......................................................................................199
Head, Bandung Regional Office.....................................................................................199
Head, Banjarmasin Regional Office...............................................................................199
Head, Makassar Regional Office....................................................................................199
Head, Special Branch Office ..............................................................................................200
Head of Inspection Offices .................................................................................................200
Inspector, Malang Regional Office.................................................................................200
Inspector, Bandar Lampung Regional Office.................................................................200
Inspector, Palembang Regional Office ...........................................................................200
Inspector, Surabaya Regional Office..............................................................................200
Inspector, Manado Regional Office................................................................................200
Regional Audit of KP, KCK, UKLN & PA Regional Office.........................................200
Inspector, Aceh Regional Office ....................................................................................200
Inspector, Semarang Regional Office.............................................................................200
Inspector, Medan Regional Office..................................................................................200
Inspector, Pekanbaru Regional Office............................................................................200
Inspector, Makassar Regional Office..............................................................................200
Inspector, Yogyakarta Regional Office ..........................................................................201
Inspector, Denpasar Regional Office..............................................................................201
Inspector, Jakarta 3 Regional Office...............................................................................201
Inspector, Jakarta 2 Regional Office...............................................................................201
Inspector, Banjarmasin Regional Office.........................................................................201
Inspector, Bandung Regional Office ..............................................................................201
Inspector, Padang Regional Office .................................................................................201

Sando Sasako
vi
Satellite Business in Indonesia ...............................................................................................202
Satellite Capability..............................................................................................................202
Satellite Users .....................................................................................................................203
Revenue Generators in Satellite Services Business........................................................205
Revenue Generation in Satellite Navigation Services Business.....................................207
Revenue Generation in Optical Data Services................................................................209
Satellite Business Value .....................................................................................................210
Satellites in Orbit ................................................................................................................214
The Crowded Space Junk ...............................................................................................215
Telkom 3 Satellite...........................................................................................................216
The Proton-M Briz-M satellite launcher.........................................................................218
The Crowded Satellites in the Sky .................................................................................220
Typical Satellite Orbits...................................................................................................226
Typical Satellite Networks .................................................................................................230
Advantages of HTS System............................................................................................232
Frequency Band Allocated for Satellite Services ...........................................................233
Indonesian Satellite Operators............................................................................................236
BRIsat .............................................................................................................................238
Palapa Satellites..............................................................................................................240
Providers of Satellite Services in Broadcasting and Tekecommunications........................242
Foreign Satellite Operators on Indonesian Sky with its client list......................................247
References...............................................................................................................................253
Additional Readings ...........................................................................................................256
Suggested Readings............................................................................................................257
Readings on Satellites.........................................................................................................258
Index .......................................................................................................................................259

vii
List of Tables
Table 1 – Assets of 4 SOE’s banks and BCA, April 2017 .........................................................1
Table 2 – Inflation in Indonesia: Target vs Realised, 2001-2018.............................................15
Table 3 – The IMF’s SDR currency basket composition, 1969-2016......................................27
Table 4 – The weights of the 5 currencies in the new SDR basket, effective 20161001 .........28
Table 5 – CFETS currency basket and weight, 20170101 .......................................................29
Table 6 – The currency basket of ECU and euro, 1979-1998 ..................................................31
Table 7 – USD contributor panel banks in LIBOR, September 2017 ......................................47
Table 8 – Name of companies involved in EIRD and YIRD cartels........................................53
Table 9 – The list of banks fined by the European Commission due to practising cartels
in interest rate derivatives of euro and yen (EIRD & YIRD) ................................54
Table 10 – FCA Benchmark Fines on LIBOR Fixing Scandal ................................................54
Table 11 – Progress reports on WFC settlements of claims, June 2016 – August 2017 ..........71
Table 12 – Financial profile of Bank Rakyat Indonesia by geographicals, 2015-2016
(Rp mn) ..................................................................................................................81
Table 13 – Financial profile of Bank Rakyat Indonesia by client types/segments, 2015-
2016 (Rp mn) .........................................................................................................82
Table 14 – BRI’s financial highlights, Dec. 2008 – Dec. 2013 (Million Rp except Par
Value).....................................................................................................................83
Table 15 – BRI’s financial highlights, 2012-2016 (Rp bn)......................................................85
Table 16 – Bank Rakyat Indonesia: Cash flow, December 2012 – December 2016 (IDR
mn).........................................................................................................................86
Table 17 – Bank Rakyat Indonesia: Income statement, December 2012 – December
2016 (IDR mn).......................................................................................................87
Table 18 – Bank Rakyat Indonesia: Balance sheet, December 2012 – December 2016
(IDR mn)................................................................................................................88
Table 19 – Fair value of financial assets and liabilities of Bank Rakyat Indonesia, 2015-
2016 (Rp mn) .........................................................................................................89
Table 20 – Maturity profile of financial assets and liabilities of Bank Rakyat Indonesia,
2015-2016 (Rp mn)................................................................................................93
Table 21 – Fund borrowings profile of Bank Rakyat Indonesia based on maturity and
currency, 2015-2016 ..............................................................................................95
Table 22 – Loan profile of Bank Rakyat Indonesia by maturity, currency, and parties
involved, 2015-2016 (Rp mn)................................................................................96
Table 23 – Loan profile of Bank Rakyat Indonesia by client segment, currency, and
parties involved, 2015-2016 (Rp mn) ....................................................................97
Table 24 – Loan profile of Bank Rakyat Indonesia by economic sectors, currency, and
parties involved, 2015-2016 (Rp mn) ....................................................................98
Table 25 – Loan profile of Bank Rakyat Indonesia by loan type, currency, and parties
involved, 2015-2016 (Rp mn)................................................................................99
Table 26 – Loan profile of Bank Rakyat Indonesia by currency, 2015-2016 (Rp mn)..........100
Table 27 – Net Open Positions of Bank Rakyat Indonesia, 2015-2016 (Rp mn)...................101
Table 28 – Loan provided by BRI to SOEs, 2015-2016.........................................................102
Table 29 – Credit risk exposure of Bank Rakyat Indonesia by regions, 2015-2016 (Rp
mn).......................................................................................................................103
Table 30 – Credit risk exposure of Bank Rakyat Indonesia by economic sectors, 2015-
2016 (Rp mn) .......................................................................................................104
Table 31 – Liability structure of Bank Rakyat Indonesia, 2012-2017q2 (Rp mn) .................105
Table 32 – Financial structure of Bank Rakyat Indonesia, December 2007 – December
2016......................................................................................................................106
Table 33 – Financial structure of Bank Rakyat Indonesia, 2012-2017q2 (%) .......................107

Sando Sasako
viii
Table 34 – Third-party funds structure in Bank Rakyat Indonesia, 2012-2017q2 (Rp mn)...108
Table 35 – Profile of fund borrowings in US dollar of Bank Rakyat Indonesia based on
loan types and lenders, 2016 (US$ mn)...............................................................109
Table 36 – The profile of bonds issued by Bank Rakyat Indonesia, 2003-2016....................111
Table 37 – The highest peak and lowest trough points of the assets of Bank Rakyat
Indonesia, January 2002 – April 2017 (monthly figures)....................................112
Table 38 – The highest peak and lowest trough points of productive assets of Bank
Rakyat Indonesia, January 2002 – April 2017 (monthly figures)........................113
Table 39 – The highest peak and lowest trough points of third parties funds of Bank
Table 40 – The highest peak and lowest trough points of loans of Bank Rakyat
Table 41 – The highest peak and lowest trough points of equity of Bank Rakyat
Table 42 – The highest peak and lowest trough points of revenues of Bank Rakyat
Table 43 – The highest peak and lowest trough points of net operating profit of Bank
Table 44 – The highest peak and lowest trough points of earnings before tax (EBT) of
Bank Rakyat Indonesia, January 2002 – April 2017 (monthly figures) ..............116
Table 45 – The highest peak and lowest trough points of earnings after tax (EAT) of
Bank Rakyat Indonesia, January 2002 – April 2017 (monthly figures) ..............117
Table 46 – The highest peak and lowest trough points of retained earnings of Bank
Table 47 – Equity structure of Bank Rakyat Indonesia, 2012-2017q2 (Rp mn)....................119
Table 48 – Earnings structure and building blocks of Bank Rakyat Indonesia, 2012-
2017q2 .................................................................................................................120
Table 49 – BRI’s stock performance, 2006 – Jan. 2014.........................................................121
Table 50 – The highest peak and lowest trough points of market capitalitasion of share
of Bank Rakyat Indonesia, 10 November 2003 – 18 July 2017: Daily value
and change ...........................................................................................................122
Table 51 – The highest peak and lowest trough points of close price of share of Bank
Rakyat Indonesia, adjusted afer split & dividends, 10 November 2003 – 18
July 2017: Daily value and change......................................................................122
Table 52 – The highest peak and lowest trough points of close price of share of Bank
Rakyat Indonesia, adjusted afer split, 10 November 2003 – 18 July 2017:
Daily value and change........................................................................................123
Table 53 – The highest peak and lowest trough points of trading volume of share of
Bank Rakyat Indonesia, 17 November 2003 – 18 July 2017: Daily value and
change ..................................................................................................................123
Table 54 – The highest peak and lowest trough points of trading value of share of Bank
Rakyat Indonesia, 10 November 2003 – 18 July 2017: Daily value and
change ..................................................................................................................124
Table 55 – The largest figures in stock trading volume, value, and their daily changes,
20031110-20170718 ............................................................................................124
Table 56 – Investors’ preferences on the shares of Bank Rakyat Indonesia, 20170630 ........125
Table 57 – Financial ratios of Bank Rakyat Indonesia, 2012-2016 .......................................126
Table 58 – Share valuation of Bank Rakyat Indonesia: Current and Forward, 20170731.....126
Table 59 – Price ratios of shares of Bank Rakyat Indonesia, compared with S&P 500,
2007-2016............................................................................................................127
Table 60 – Liquidity ratio of Bank Rakyat Indonesia, December 2007 – December 2016 ...128

ix
Table 61 – Cash flow ratios of Bank Rakyat Indonesia, December 2007 – December
2016......................................................................................................................129
Table 62 – Profitability of Bank Rakyat Indonesia, December 2007 – December 2016 .......130
Table 63 – Profit margin profile of Bank Rakyat Indonesia, December 2007 – December
2016......................................................................................................................131
Table 64 – Revenue profile of Bank Rakyat Indonesia, December 2007 – December
2016 (Rp mn) .......................................................................................................132
Table 65 – Revenue sustainability of Bank Rakyat Indonesia, December 2007 –
December 2016 ....................................................................................................133
Table 66 – Typical shareholders of Bank Rakyat Indonesia, 2015-2016...............................134
Table 67 – Institutional shareholders of Bank Rakyat Indonesia, 20161230-20170630........136
Table 68 – Institutional investors’ ownership on equity in Bank Rakyat Indonesia,
20170731..............................................................................................................137
Table 69 – Funds’ ownership on equity in Bank Rakyat Indonesia, 20170731 .....................138
Table 70 – BRI’s subsidiaries, 20161231...............................................................................139
Table 71 – The acquisition cost of BRI’s subsidiaries, 2015-2016........................................139
Table 72 – The milestones of BRI Syariah.............................................................................139
Table 73 – Some financial figures of BRI Syariah, 2015-2016..............................................139
Table 74 – The milestones of BRI Agro.................................................................................140
Table 75 – Some financial figures of BRI Agro, 2015-2016..................................................141
Table 76 – The milestones of BRI Remittance.......................................................................141
Table 77 – Some financial figures of BRI Remittance, 2015-2016........................................142
Table 78 – The milestones of BRI Life ..................................................................................142
Table 79 – Some financial figures of BRI Life, 2015-2016 ...................................................142
Table 80 – The milestones of BRI Finance ............................................................................143
Table 81 – Some financial figures of BRI Finance, 2015-2016 .............................................143
Table 82 – The investments of Bank Rakyat Indonesia (associated companies) by cost
method, 2014-2016 ..............................................................................................144
Table 83 – Transactions of Bank Rakyat Indonesia with related parties by transaction
types, 2015-2016..................................................................................................145
Table 84 – BRI’s non-financial investments, 2016 ................................................................145
Table 85 – Material commitments of Bank Rakyat Indonesia on capital expenditures,
2015-2016 ............................................................................................................146
Table 86 – Typical transactions between Bank Rakyat Indonesia with affiliated parties ......146
Table 87 – Transactions of Bank Rakyat Indonesia with related parties by institutions’
name and transaction types, 2015-2016...............................................................148
Table 88 – The registered analysts of Bank Rakyat Indonesia, 2016.....................................151
Table 89 – The e-channels of Bank Rakyat Indonesia, 2012-2016........................................155
Table 90 – The typical offices of Bank Rakyat Indonesia, 2012-2016 ..................................155
Table 91 – The typical offices of Bank Rakyat Indonesia by province, 2016........................156
Table 92 – Concurrent positions of Commissioners of Bank Rakyat Indonesia,
20161231..............................................................................................................162
Table 93 – The commissioners of Bank Rakyat Indonesia: Supervised region and
Committees Membership, 20161231...................................................................163
Table 94 – The commissioners of Bank Rakyat Indonesia: Risk Management
Certification, 20161231 .......................................................................................164
Table 95 – The commissioners of Bank Rakyat Indonesia: Overseas Education,
Training, and Conferences, 2016.........................................................................165
Table 96 – The commissioners of Bank Rakyat Indonesia: Domestic Education,
Training, and Conferences, 2016.........................................................................166
Table 97 – The Board of Directors of Bank Rakyat Indonesia, 2015-2017 ...........................181

Sando Sasako
x
Table 98 – Area supervised by commissioners and directors of Bank Rakyat Indonesia,
20161231 .............................................................................................................182
Table 99 – The directors of Bank Rakyat Indonesia: Risk Management Certification,
20161231 .............................................................................................................183
Table 100 – The directors of Bank Rakyat Indonesia: Competency development
program, 2016......................................................................................................184
Table 101 – Job distribution of Directors and SEVPs of Bank Rakyat Indonesia within
Directors’ Committees, 20161231.......................................................................185
Table 102 – World’s satellite services revenue by 4 market segments, 2006-2011 (US$
bn)........................................................................................................................205
Table 103 – Satellite services revenue generation, 2012-2016 (US$ bn)...............................213
Table 104 – List of sub-bands of FSS and BSS spectrum......................................................233
Table 105 – Frequency band allocated for satellite services ..................................................234
Table 106 –Indonesian Satellites Filing in ITU, 2016............................................................236
Table 107 – Profile of Indonesian Satellites...........................................................................237
Table 108 – The list of companies providing satellite services in broadcasting and
telecommunications & satellites leased, 20161231 .............................................242
Table 109 –The list of foreign satellites orbitting and operating on Indonesian sky,
20161231 .............................................................................................................247

xi
List of Figures
Figure 1 – Monetary operation of Bank Indonesia and monetary instruments in
Indonesia................................................................................................................11
Figure 2 – Monetary operation of Bank Indonesia and monetary instruments ........................11
Figure 3 – Inflation targetting framework by macroeconomic indicators in Indonesia ...........13
Figure 4 – Inflation targetting framework by institutions responsible and in charge in
Indonesia................................................................................................................15
Figure 5 – Monthly inflation rates in Indonesia, January 2003-August 2017 ..........................16
Figure 6 – Monthly value of monetary operation in conventional banking in Indonesia,
Jan.2010-Aug.2017 (Rp bn)...................................................................................17
Figure 7 – Monetary operation in islamic banking industry in Indonesia, Jan. 2010-
August 2017 (% of total)........................................................................................17
Figure 8 – BI Rate, July 2005 – July 2016 ...............................................................................19
Figure 9 – BI 7-Day rate, April 2016 – August 2017...............................................................19
Figure 10 – BI Rate (July 2005 – July 2016) and BI 7-Day rate (April 2016 – August
2017) ......................................................................................................................19
Figure 11 – The transaction value of Indonesian money market, January 2010 – August
2017........................................................................................................................21
Figure 12 – JISDOR (Jakarta Interbank Spot Dollar Rate), 20130520-20170908
(US$/IDR)..............................................................................................................21
Figure 13 – US$/IDR buying price and its spread with the selling price of Bank
Indonesia, 20070102-20170908.............................................................................22
Figure 14 – FTSE All-Share index, 19990409-20170911........................................................23
Figure 15 – FTSE 100 index, 19840413-20170911 .................................................................23
Figure 16 – GBP/USD, 19710104-20170901...........................................................................25
Figure 17 – GBP/EUR, 19860508-20170911...........................................................................25
Figure 18 – GBP/USD, 19880304-20170911...........................................................................25
Figure 19 – RMB/USD, 19810101-20170912..........................................................................29
Figure 20 – ERM weighted mean and German inflation rates, 1971-1993..............................33
Figure 21 – ERM weighted mean and German inflation rates, quarterly, 1971-1993 .............33
Figure 22 – Overnight and long-term interest rates in Germany, 1970-1997...........................35
Figure 23 – Overnight and long-term interest rates in the UK, 1980-1997..............................35
Figure 24 – GBP/DM and UK base rates, 1992 .......................................................................35
Figure 25 – GBP/DM, 1990-2005 ............................................................................................35
Figure 26 – The inflation in the UK, 1270-1991 ......................................................................39
Figure 27 – Inflation targeting, unemployment, and economic growth in Germany,
1970-1997 ..............................................................................................................40
Figure 28 – Inflation targeting, unemployment, and economic growth in the UK, 1980-
1997........................................................................................................................40
Figure 29 – The US debts and its gold reserves, 1917-2012....................................................41
Figure 30 – The US debts & its limit and gold price, 2000-20170317.....................................41
Figure 31 – Inflation rates in Germany: Target vs Actual, 1970-1997.....................................42
Figure 32 – Inflation rates in the UK: Target vs Actual, 1980-1997........................................42
Figure 33 – Inflation rates in Germany: Target and actual, 1970-1997 ...................................43
Figure 34 – GBP/USD, 1980-1997...........................................................................................43
Figure 35 – The UK Phillips correlation in the 20th century: Inter-war era, 1926-1935 .........44
Figure 36 – The UK Phillips correlation in the 20th century: Post-WW2 era, 1961-2004 ......44
Figure 37 – Monthly inflation rates in Germany, 199201-201707...........................................45
Figure 38 – Monthly inflation rates in the UK, 198901-201708..............................................45
Figure 39 – Calculating LIBOR................................................................................................46

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