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Bank ownership revision will encourage investment
OJK banking supervisory division head Heru Kristiayana confirmed that the agency would soon no longer require banks within the third and fourth quartiles to have a single ownership system in its acquisition process with small banks, which could later function into specialized satellite institutions.
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The Financial Services Authority (OJK) logo is seen on the frontispiece at its headquarters in Jakarta. (kontan.co.id/File)
B
anks welcomed the Financial Services Authority's (OJK) plan to relax bank ownership rules as it is expected to encourage more deals in the banking industry, although it comes with risks.
OJK banking supervisory division head Heru Kristiayana confirmed that the agency would soon no longer require banks within the third and fourth quartiles to have a single ownership system in its acquisition process with small banks, which could later function into specialized satellite institutions.
“The relaxation will act as a sweetener for bigger banks to consolidate with smaller banks. Otherwise, they may not find it worthwhile to merge with smaller banks,” Heru told The Jakarta Post on Friday, without disclosing details of the timeline of the policy revision.
The so-called single presence policy, rolled out in 2006 to consolidate 2,000 banks in the country, obliges local banks’ majority shareholders to own only one banking entity, therefore requiring mergers when it acquires banks with a different portfolio.
By relaxing the rule, foreign and domestic banks can invest in local lenders with ease. Small banks could be more exposed to better funding, technology and human capital, Heru said.
The number of commercial banks in Indonesia, the highest in the region, stands at 115 banks, compared with 124 banks in 2012 and 138 in 2004.
That compares with the banking architecture roadmap rolled out by Bank Indonesia that projected the industry by 2014 would have three international-class banks with over US$5.8 billion capital, three to five national anchor banks with $1.5 billion to $5.8 billion capital and 30 to 50 smaller specialized banks.
