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Four banks ready to parent regional consolidation into KUBs: OJK
The OJK's stricter capital rules could lead to a flurry of consolidation among regional banks under a parent bank this year, though the Asbanda chair has cautioned that a BPD was not necessarily a troubled bank if it did not meet the Rp 3 trillion core capital requirement.
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Bank BJB’s headquarters in Bandung, West Java (Bank bjb/-)
T
he Financial Services Authority (OJK) says 11 regional development banks (BPDs) are yet to comply with its stricter capital rules, and the banks’ efforts to address the issue could lead to consolidation in the industry this year.
The BPDs must either increase their capital or merge with other banks to achieve the minimum core capital requirement of Rp 3 trillion (US$193 million) before Dec. 31, 2024.
Failure to comply with the OJK’s requirement will result in a change in the lenders’ status to a rural bank, limiting the services they can offer.
“Two BPDs have submitted plans to increase their capital. Meanwhile, the other nine lenders are set to join banking business groups [KUBs] with other banks,” Dian Ediana Rae, chief executive of banking supervision at the OJK, said in a statement on Thursday.
“Until now, four banks have stated their readiness to become parent companies of those KUBs,” he added, without identifying the banks.
According to him, a bank must have adequate capital and sufficient performance to serve as a parent company of a banking group, so it can strengthen the capital and liquidity of the group’s member banks. In addition, a parent bank must build the capacity of KUB member banks in disbursing productive loans in their regions.
Yuddy Renaldi, chairman of the Association of Regional Development Banks (Asbanda), explained that regional banks with less than Rp 3 trillion in core capital were not necessarily troubled banks. It would therefore be a loss if those banks failed to fulfill the OJK’s requirements and restrictions were placed on their services.
