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tate-owned lender Bank Mandiri expects that a new agreement between Indonesia and Malaysia banking regulators on market access will pave the way for the lender to finally expand operations in the neighboring country this year, after facing stumbling blocks in the past few years.

The new agreement, scheduled to be signed in September at the latest, is a follow-up from an agreement signed by the heads of Bank Indonesia (BI), the Financial Services Authority (OJK) and Bank Negara Malaysia (BNM) last year, in which Malaysia agreed to ease restrictions imposed on Indonesian banks to operate in the country.

Bank Mandiri finance and strategy director Pahala N. Mansury was hopeful that the opening of several branches and automatic teller machines (ATMs) in public places in the neighboring nation would be among the points to be agreed upon from the start.

'€œWe might open eight to 20 branches. We are still in the review process,'€ he told The Jakarta Post recently.

Bank Mandiri is currently the only Indonesian bank operating in Malaysia, but it only does remittance business. The bank has had a commercial banking license to operate a wholly owned subsidiary since 2010, but is still unable to operate as a full branch due to the 300 million Malaysian ringgit (US$78.72 million) capital requirements imposed by the Malaysian central bank.

OJK chairman Muliaman D. Hadad said that the BNM has signaled that it will allow Mandiri to pay the capital requirement in installments.

'€œ[Bank Mandiri] can pay installments over five years. [...] They have the funds, but to prevent it from affecting their capital here and their CAR [capital adequacy ratio], it'€™s better to pay in installments,'€ he said recently.

OJK deputy commissioner for banking supervision Mulya Siregar said the memorandum of understanding (MoU) on market access of Indonesian banks in Malaysia will be signed after inking an MoU on cross-border supervision of Indonesian and Malaysian banks in August.

The MoUs are part of a larger ASEAN Banking Integration Framework (ABIF) that has been designed for the 10 member countries within ASEAN, supported by the latest signing of the ASEAN Framework Agreement on Services (AFAS) by the countries'€™ finance ministers and central bank governors as its umbrella agreement in March.

Bank Mandiri sought to be given the status of a '€œQualified ASEAN Bank'€ (QAB), which under the ABIF guidelines means that it would be able to carry out operations in neighboring countries and receive the same treatment as local banks.

'€œWe have submitted a letter to the BNM and to OJK that we are interested to operate in Malaysia and to be a QAB bank,'€ Pahala of Bank Mandiri said, expecting the QAB status would ease its expansion plans in Malaysia.

According to the guidelines, only '€œindigenous'€ banks can acquire QAB status, which means a bank is required to have been established and based in an ASEAN country, as well as owned by ASEAN citizens. Its complete requirements have not been specified yet.

The OJK also aims for four Indonesian banks to qualify for the QAB status and expand in Malaysia, because there are large sums of remittance sent from Malaysia.

In the first quarter of 2015, Indonesian workers in Malaysia remitted $44 million to their homes, according to the economic and financial statistics (SEKI) published by Bank Indonesia. (fsu)
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'€œWe might open eight to 20 branches. We are still in the review process.'€