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top executive of a major local bank says that the Monetary Authority of Singapore (MAS), the island state’s central bank, has softened its stance against Indonesian lenders in what is being viewed as a victory for Bank Indonesia (BI) in its reciprocity lobbying to assist the expansion of Indonesian banks there.

Bank Rakyat Indonesia (BRI) president director Sofyan Basir says the bank will establish a new branch in Singapore, following in the footsteps of other state-run banks such as Bank Mandiri and Bank Negara Indonesia (BNI) that already do business there.

While Singapore is known to have one of the world’s most restrictive banking systems, Sofyan noted that there had been a change in stance recently.

“From their discussions with us, they [MAS] have already become softer,” Sofyan told reporters when asked whether the Singapore central bank had become less restrictive toward Indonesian banks. “It is apparent,” he added.

The statement signals a victory for Indonesia’s state-run lenders, which have demanded that BI lobby other central banks in the region to open their markets.

Banks such as Bank Mandiri and BNI frequently meet difficulties when planning to expand their business overseas — especially in Singapore, a situation that local bankers claim is a paradox as Indonesia currently boasts one of the world’s most open banking systems.

“If Singaporean banks can tap Indonesia’s market of 240 million citizens, then why are we hindered when trying to do the same to Singapore’s market of two million citizens?” said Sofyan.

Despite its small size and population, Singapore offered lucrative business opportunities in banking as many Indonesian businesspeople and migrant workers lived there, the BRI president director added.

Debates over reciprocity issues between Indonesia and Singapore intensified after the US$6.8 billion acquisition plan of Bank Danamon, submitted by Singapore’s DBS Group Holdings Ltd., went public in April last year.

Last week, BI Governor Darmin Nasution hinted at the deal’s progress, saying that it would be completed at least by the end of this year. For the banking turnover to be completed, however, BI still needed to settle some outstanding issues with Singapore’s MAS, Darmin said, without elaborating on the detail of his demands.

Economists say that Indonesia, whose banking industry has enjoyed both rapid growth and high profitability, has a strong bargaining position in its negotiations with Singapore, with MAS believed to be able to eventually meet BI’s demands so that DBS Bank and other Singaporean banks can expand their businesses here.

“I’m sure that Singapore has placed Indonesia as its high-priority market,” said A. Tony Prasetiantono, an economist with Gadjah Mada University.

Such situation would lead MAS to give a “privilege” to Indonesian banks, allowing them to operate in Singapore with less strict regulations, Tony said.

Representatives from Mandiri and BNI disagreed with BRI, claiming that they were still burdened by MAS’ strict banking requirements.

“We can say Singapore is ‘softening’ if it grants the permit to us. Up to now it remains only false promises,” BNI president director Gatot M. Suwondo said in Jakarta on Monday.

He said that BNI had requested the Singaporean banking authority to give the bank a fully-fledged banking license with less strict requirements, but so far there had been “no signs” of approval.

Bank Mandiri finance director Pahala N. Mansury said that his bank’s request for more relaxed requirements to operate in Singapore “[had] yet to receive a response from the regulator there, but we hope that the reciprocity principle can be made a reality soon”.