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Jakarta Post

OJK to regulate capital for financial heavyweights

  • Grace D. Amianti

    The Jakarta Post

Jakarta   /   Tue, January 27, 2015   /  08:40 am

The Financial Services Authority (OJK) plans to set a minimum capital requirement for entities to control their financial groups, ensuring sustainability amid risks faced by their subsidiaries.

The OJK is reviewing the best format to measure consolidated minimum capital requirements, according to OJK commissioner on banking supervision Nelson Tampubolon.

'€œWe hope to complete the review in the first half of this year,'€ Nelson said on Monday.

Nelson said the supervision of financial conglomerates was one of the OJK'€™s major tasks in maintaining the stability of the domestic financial system, which had reached a total asset level of Rp 6.75 quadrillion (US$538.90 billion), 68 percent of which was controlled by 32 financial conglomerates.

Nelson said more domestic banks were eager to build conglomerates, or groups, in which they would acquire companies in insurance, securities, multi-finance and other financial entities.

According to Nelson, the risks are increasing as the industry grows.

Previously, OJK ex-officio executive of Bank Indonesia (BI) Halim Alamsyah said the OJK and the central bank were finalizing the assessments of a number of Indonesian banks to determine which ones were domestic systematically important banks (DSIBs), a category that classified certain banks deemed to have systemic risks due to their wide range of businesses and subsidiaries.

Halim said the category, scheduled to be announced during the next Financial Sector Stability Coordination Forum (FKSSK) later this year and ready to be implemented next year, would calculate certain aspects of a bank, such as its size, inter-connectivity and business complexity.

Nelson said the OJK had completed assessments on 32 banks that owned holdings or multi-subsidiaries, all of which had positive financial conditions. Of the 32, he said 16 were in the process of mapping whether they had the potential to become DSIBs.

Nelson added that the OJK would require the financial conglomerates to appoint the main entities that would be responsible for monitoring their groups. The main entities will probably be the major shareholders or controllers of the groups, he said.

OJK deputy director for commercial bank regulation Eddy Manindo Harahap said the main entities would be required to review and direct their subsidiaries regarding certain risks that would emerge during the business activities of each institution.

At the same time, he said the OJK would systematically supervise conglomerates'€™ consolidated reports as well as each member'€™s financial reports.

Bank Negara Indonesia (BNI) president director Gatot Suwondo said his bank aimed to be a large group called '€œBNI Financial Services'€, which would offer end-to-end financial products and services to meet the growing demand of its customers.

BNI owns four subsidiaries '€” BNI Syariah, BNI Life Insurance, BNI Multifinance and BNI Securities, with each not having contributed more than 10 percent of return of investment (ROI) to their mother company.

Bank Rakyat Indonesia finance director Achmad Baiquni said the lender also planned to acquire a new insurance subsidiary this year, even though it already had a life insurance subsidiary called Bringin Life.

'€œThe life insurance business is attractive, especially bancassurance, so it'€™s our choice,'€ Baiquni said.

West Java'€™s regional development bank PT Bank BJB is also interested in acquiring an insurance company as it plans to add to its capital in 2016, said its president director, Ahmad Irfan.

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