BI supports government plan to set up holding company for state banks

The Jakarta Post ,  Jakarta   |  Sat, 01/26/2008 4:00 AM  |  Business

Bank Indonesia (BI) has announced it supports the government plan to establish a new holding company for state-owned banks in order to comply with the central bank's single presence policy.

The policy prevents investors, either from the government or private sector, from owning a majority stake in more than one bank.

"We're studying the State Ministry of State-owned Enterprises' concept to establish a new holding company, and will help them to implement the plan," BI banking research and management directorate manager Halim Alamsyah said Friday.

He said both representatives from the government and the bank had appointed teams to further discuss the concept.

State-owned Minister Sofyan Djalil said recently that to comply with the single presence policy, the government planned to establish a holding company for its banks, which could function as the main bank.

The government currently holds the majority stake in five banks: Bank Ekspor Indonesia, Bank Mandiri, Bank Negara Indonesia, Bank Rakyat Indonesia and Bank Tabungan Negara.

However, Sofyan said, before applying the plan, the government should first seek approval from the House of Representatives.

Sofyan ensured that the whole process would be completed within two years.

The single presence policy is part of a central bank policy package aimed to encourage consolidation among the country's banking sector, which boasts currently more than 130 banks.

The policy package is expected to create a healthier and more dynamic banking industry -- a sector hit the hardest by the 1997-1998 financial crisis.

The single presence policy requires investors who own controlling stakes in more than one bank to merge their banks, conduct an acquisition or establish a holding company by 2010.

Earlier, Malaysian-based Khazanah Nasional Berhard decided to merge its two banks in Indonesia, Bank Niaga and Bank Lippo, in an effort to comply with BI policy. Khazanah has an indirect equity interest of some 93 percent in Lippo and 64 percent in Niaga.

Many economists said that while the government decision to establish a holding company for its banks was not the best solution because it would create additional bureaucracy, it was the most realistic option so far.

They said if the government chose to merge its banks, for example, it would affect their image both politically and socially. (ndr)

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