Government to set up holding company for state banks

The government will set up a parent holding company for state-owned banks to comply with a regulation prohibiting any one party from owning a majority stake in more than one bank.

"We decided to establish a holding company for state banks. However, the details are still being discussed," State Minister for State Enterprises Sofyan A. Djalil said Friday as reported by Antara news agency.

Bank Indonesia, the country's central bank, has laid out a set of regulations aimed at strengthening the banking industry by increasing capital and improving risk management, transparency and accountability.

A regulation called the Single Presence Policy (SPP) bans any one party, whether private or government, from having majority ownership in more than one bank.

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

The regulation will officially take effect in 2010, but the central bank requires parties accountable under the ruling, including the government, to present a plan for compliance by June.

Such parties have the option to reduce their number of stakes, force a merger, or set up a parent holding company for their banks.

The government currently holds majority stakes in Bank Mandiri, Bank Negara Indonesia (BNI), Bank Rakyat Indonesia (BRI) and Bank Tabungan Negara (BTN).

Sofyan said his office had consulted the Coordinating Minister for the Economy and the Finance Minister in making the decision to form a holding company.

This year, Malaysian-based Khazanah Nasional Berhad decided to merge its two banks in Indonesia, Bank Niaga and Bank Lippo, to comply with the policy.

Khazanah has an indirect equity interest of some 93 percent in Lippo and 64 percent in Niaga. (rff)