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Group calls for clarity in banking bill talks
The National Banks Association (Perbanas) has proposed several recommendations on the banking bill to the House of Representatives, asking lawmakers for more clarity on banking consolidation and to set aside blind nationalism
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The National Banks Association (Perbanas) has proposed several recommendations on the banking bill to the House of Representatives, asking lawmakers for more clarity on banking consolidation and to set aside blind nationalism.
Speaking during a hearing at House Commission XI overseeing finance on Wednesday, Perbanas chairman Sigit Pramono insisted that the upcoming bill should give clarity on the country's banking consolidation.
'It should clearly describe what we want to achieve in banking consolidation because a wishy-washy vision will get us nowhere,' he said, pointing to last year's case of Bank Mandiri and Bank Tabungan Negara (BTN).
A consolidation plan between Mandiri and BTN ' both owned by the state ' emerged in 2014, but its realization never saw the light of day, leaving the government's consolidation commitment in question, according to Sigit.
He said that consolidation must begin with the state banks as they had the same owner and such a move would help reduce the number of existing banks.
There are 118 commercial banks, including four state banks, operating at present, reflecting heavy fragmentation in the domestic banking industry.
In the hearing, Perbanas emphasized the need to complete the revisions of other laws before the politicians actually moved on to formulate the banking law.
Sigit said that these laws ' such as those on Bank Indonesia (BI), the Financial Services Authority (OJK) and the Deposit Insurance Corporation (LPS) ' were crucial because they governed the authorities in charge of the banking industries.
One point also highlighted by Perbanas regarding the authorities was the banking supervision task, which was taken by the OJK from BI in January 2014.
The association claimed that the task's separation from BI's jurisdiction had created confusion among banks.
'At first, the goal was to separate the microprudential aspect of the financial industry from the macroprudential, but it turned out that was not easy to make such a distinction. The interest rate is one example because both say that it's part of their work,' said Sigit.
He added that Perbanas would prefer to see banking supervision returned to BI rather than under the OJK.
In terms of banking ownership, Perbanas argued that the future regulation should not focus on limiting foreign stakes at a certain percentage.
It reminded that following the 1998 economic crisis, the Indonesian government invited foreign investors to enter the banking industry and allowed them to own up to a 99 percent stake in a private bank.
'These banks have evolved much from 1998 and their valuations have surged. Let's be rational. Do we have the capacity to purchase foreign owners' shares if they are forced to reduce their stakes? The shares will cost trillions of rupiah,' Sigit said.
