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KL shackles expansion of RI banks
The ambition of Indonesiaâs major banks to gain a more solid regional footing has encountered a setback with the stymieing of the expansion of state-run Bank Mandiri, the nationâs largest lender, into Malaysia
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he ambition of Indonesia's major banks to gain a more solid regional footing has encountered a setback with the stymieing of the expansion of state-run Bank Mandiri, the nation's largest lender, into Malaysia.
The hurdles the bank has faced have once again highlighted the lack of reciprocity between Indonesia and its neighbors, particularly Malaysia and Singapore, as their banks have enjoyed a smooth path into the Indonesian market.
Mandiri president director Budi Gunadi Sadikin said that it would continue to pursue wider access into Malaysia even though Malaysia's central bank, Bank Negara Malaysia (BNM), had not responded to its requests for a degree of leeway.
'We have not canceled anything. The arrangement is still in place and the expansion strategy remains the same,' he said late on Sunday.
Budi said the bank had been working to expand into Malaysia since 2010 during the tenure of then president director Agus Martowardojo ' now Bank Indonesia (BI) governor.
It gained approval from BNM to open its first branch in Kuala Lumpur in 2011 under a remittance license. However, Budi claims its efforts to secure full banking status have been met with little success because the requirements set by BNM are 'too restrictive', compared to the convenience enjoyed by Malaysian banks in Indonesia.
Among the contentious issues, described as overly protective by Mandiri, are the amount of paid-up capital and the number of branches and ATMs allowed by BNM for foreign banks wanting to operate in Malaysia.
BNM currently requires foreign banks to have 300 million ringgits (US$94.6 million) in paid-up capital, but Mandiri proposed the figure be lowered to 100 million ringgits during the initial stage and then increased gradually as the business grew.
'We do not object to the overall capital requirement as we have sufficient funds, but we would rather adjust the amount to the initial size of the business than inject 300 million ringgits up front for a very limited operation,' he added.
Malaysia is regarded as a lucrative market for Indonesian banks, given the huge number of Indonesian nationals and businesses there.
For Mandiri and other local banks, such as Bank Rakyat Indonesia (BRI) and Bank Negara Indonesia (BNI), their target in Malaysia is the retail segment that serves, among others, Indonesians who are in Malaysia for medical treatment and leisure.
State-run BNI, Indonesia's fourth largest bank, has also sought to expand into Malaysia. 'But we have not heard anything from the Malaysian authorities,' BNI treasury and financial institutions Adi Setianto said.
During her visit to Jakarta late last year, BNM governor Zeti Akhtar Aziz told reporters that the central bank had issued a full banking license for Mandiri.
However, Budi insisted that it had not received any official notification from BNM regarding its status. 'BNM may turn down our request, but we are not backing out of our effort.'
When asked about the hurdles, BNM said in an email that it did not comment on individual financial institutions.
While Malaysia seeks to limit the entry of Indonesian banks, its financial flagship Maybank can operate freely through Bank Internasional Indonesia (BII) and CIMB operates through Bank Niaga.
The reciprocity debate has been raging since earlier this year after BI capped the potential shareholding of Singapore's DBS Group Holdings Ltd. in Bank Danamon. In order for DBS to increase its stake, BI asked the Monetary Authority of Singapore to provide greater access to Mandiri, BNI and BRI to expand their business in Singapore. DBS pulled out of the deal in August.
University of Gadjah Mada economist A. Tony Prasetiantono said that it would take a new government approach to end the current expansion deadlock. 'Singaporean and Malaysian banks have benefited from their operations here. So it's justifiable for us to demand reciprocity.'
Banking analyst Raden Pardede, however, argued that banks must not force their way by using the reciprocity issue. 'Calling for reciprocity intervenes in those countries' national policies. The problem actually lies with us if foreign banks have been able to operate freely here because we have not been consistent in our own regulations.'
