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NEWS UPDATES Asean Affairs               1  August 2011

New bank ownership rule floated

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The Indonesian central bank's recent admission that it wants to enforce ownership limits for commercial banks has caused nervousness in Indonesia's banking community.

At least one foreign-owned bank has commissioned consultants to find out the likelihood of this happening, while an Indonesian-owned bank has reportedly engaged local media on the issue in the hope that it will become a topic of public discussion.

Last month, Bank Indonesia (BI) governor Darmin Nasution said that BI could issue a new regulation as early as year-end, to prevent bank ownership domination by one or two major investors.

Indonesia now allows any investor to own up to 99 percent of a bank incorporated in Indonesia. The new regulation, which has been talked about for a while, would likely cap the maximum individual stake at less than 50 percent. It could also be applied retroactively, although it is not clear how far back this will go.

Some analysts have rubbished the possibility of the new regulation being implemented, saying it will cause too much turmoil to the thriving banking sector, where annual loan growth now exceeds 20 percent. Others question whether it will apply to state-owned banks - where the government is the majority investor.

If the new rule becomes law, however, majority shareholders such as Indonesian tycoons and foreign banks - including Singapore's DBS, UOB and OCBC - will be forced to sell down their stakes.

BI says the rule will apply to all banks, but analysts staunchly believe that this is aimed at checking the influence of foreign investors in the banking sector.

Over a third of Indonesia's 121 banks are either branches of foreign banks, such as HSBC, or local banks majority-owned by foreigners, like Bank Danamon, which is 67.4 percent owned by Singapore's Temasek Holdings.

Singapore and Malaysian institutions are among the most active players in the scene. For instance, DBS Indonesia, UOB Buana and OCBC-NISP are majority-owned by their Singapore parents, as are CIMB Niaga and Bank BII by Malaysian banks CIMB and Maybank.

Apart from the ownership cap, the central bank is also gunning for a separate regulation that would make foreign bank branches operate as limited companies. This would give BI more scrutiny of these banks, and talk is that it would almost certainly insist that top management posts are filled only by Indonesians.

 


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