The purchase, estimated at $123 million, breathes life into an Indonesian bank-recapitalization programme floundering under skyrocketing costs. Recent government estimates set the total bailout at 550 trillion rupiah ($80.17 billion), while US rating agency Standard & Poor's Group calculated it at $87 billion, or 82 per cent of Indonesian economic output, among the costliest financial-sector rescues in history. Foreign purchases of Indonesian banks are seen as essential for reducing these costs.

"This agreement demonstrates a vote of confidence by the international community in the long-term potential" of Indonesia's banking system, said Glenn Yusuf, chairman of the Indonesian Bank Restructuring Agency, or IBRA, in a statement.

Standard Chartered originally struck a deal with Indonesia last April to pay$56 million, for a 20 per cent stake in Bank Bali. It also was to be granted management control and an option to purchase the remaining shares of the bank over a five-year period. Bank Bali was one of nine private banks chosen to take part in a government bank recapitalization programme; under its terms, the bank's owners are to raise 20 per cent of the bailout funds, while the government provides the rest through a bond issuance.

Three months of due diligence conducted by Standard Chartered failed to result in a ratification of the deal, however. And the skyrocketing cost of the recapitalization is seen as the reason. According to Standard Chartered, the amount of funds now needed to raise Bank Bali's capital to 4 per cent of its risk-adjusted assets is 4.3 trillion rupiah, compared to an April estimate of 2.4 trillion rupiah. The Indonesian government took over Bank Bali this weekend, when the July 23 deadline for the deal's completion passed.

But even with Bank Bali in the government's hands, most ofthe terms of the original agreement remain. Standard Chartered was granted effective management control of the bank Monday and will place an executive in charge of Bank Bali's management team. Standard Chartered also is set to take a 20 per cent stake in Bank Bali through a September rights issue and will have an option to buy the remaining shares from the government over a five-year period.

"The Indonesian government got an extremely good deal from Standard Chartered," as the recapitalization cost of the bank will be covered, said one executive involved in the transaction. Standard Chartered Group's Executive Chairman Rana Talwar said his United Kingdom-based bank now has "a firm platform to develop a leading commercial bank in Indonesia."

Bank Bali is one of Indonesia's top consumer banks with over 280 branches, one million customers, and 10 trillion rupiah in assets. Shares of Bank Bali were suspended on the Jakarta Stock Exchange on Monday pending the announcement of the transaction.