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fter prolonged negotiations, the Malaysian central bank has finally granted a full banking license to state-owned Bank Mandiri, which gives Indonesia’s largest lender access to the growing number of Indonesians in the neighboring country.

Bank Negara Malaysia (BNM) Governor Zeti Akhtar Aziz said on Wednesday that her institution had already issued a fully fledged banking license to five foreign banks. Bank Mandiri is the only bank from an ASEAN country, the other four originate in Europe, the Middle East and Japan.

“We have already issued a license for Bank Mandiri to open fully-fledged banking in Malaysia. Bank Mandiri made the application and they received approval,” she told reporters in Jakarta on Wednesday.

The central bank governor added that she expected the lender to commence operations early next year.

Bank Mandiri is currently operating in Malaysia under the license of remittance office, which only allows banking transactions related to remittance business.

Currently, there are about 2.3 million Indonesian workers in Malaysia, contributing approximately US$2 billion remittance to the archipelago every year, according to a data from the National Agency for Overseas Labor Placement and Protection (BNP2TKI).

With the license under its belt, Bank Mandiri should be able to perform full banking services, including raising third party funds, opening automatic teller machines (ATMs) and channeling loans.

However, Bank Mandiri still faces a crucial constraint to gaining the license in Malaysia — BNM’s requirement, imposed on foreign banks, to have 300 million ringgit ($98.2 million) in paid-up capital. This amount is considered too high, about 10 times the minimum capital requirement imposed on Indonesian banks. Bank Mandiri has asked the central bank to persuade its Malaysian counterpart to reduce the capital requirement to 100 million ringgit.

Responding to journalists’ questions on the matter, Zeti said that she would “provide the flexibility” for Bank Mandiri but did not elaborate.

“We have legislation that defines capital requirement but we have discussed [the issue] it would be premature for me to describe [the flexibility].”

Contacted separately, executives from Bank Mandiri claimed to be unaware of the issue, saying that they were still waiting for the Malaysian central bank’s official response for its request to loosen the requirements.

“We are still waiting for a reply from BNM regarding a letter that was sent in April, October and December,” Bank Mandiri finance director Pahala N. Mansury told The Jakarta Post on Wednesday.

“Our decision to expand business in Malaysia depends on issues that have been promised by the [banking] authority of Malaysia,” he added.

Local bankers have frequently complained that they faced difficulties in expanding their banks overseas, calling on Bank Indonesia (BI) to apply reciprocal treatment, given the ease foreign banks can expand here.

Observing the recent negotiation with BNM, Bank Mandiri chief economist Destry Damayanti noted on Wednesday that the Malaysian banking authority “has become more welcoming” to Indonesian banks’ entry, because it is realizing the immense potential of the archipelago’s banking industry.

“It is because Malaysian banks want to expand here,” she said.

At present, Mandiri operates several branches or representative offices in Singapore, Hong Kong,
London, Dili, the Cayman Islands and Shanghai. (sat)