Bank Health a Key Factor in New Bank Indonesia Rules

The state of a bank’s financial health will be a key determinant of whether it is subject to new Bank Indonesia rules setting caps on the percentage of a lender that can be owned by a single shareholder.

Banking sources have told Investor Daily that a briefing from the central bank confirmed that the cap would be set at 40 percent for a corporate owner and 20 percent or 30 percent for an individual owner, depending on circumstances.

The ownership rules apply to banks deemed to be of moderate to high risk of encountering difficulties, but exempt state-owned banks. State-owned banks include Bank Mandiri, Bank Negara Indonesia, Bank Rakyat Indonesia and Bank Tabungan Negara.

The maximum share that can be held by an individual or family is 20 percent, although if the stake is held through a company, that increases to 30 percent, Bank Indonesia said, according to the sources, who requested anonymity because the information is yet to make public.

“If the controlling shareholder is a bank or financial institution, the maximum stake allowed is 40 percent,” one of the sources said on Monday.

The source said the ownership restrictions would apply to banks deemed to be moderately or highly risky with regard to their capital adequacy and governance. The source added that the central bank would also give those banks deemed high risk a chance to improve their risk status before the ownership limit is imposed.

Last week the central bank assured markets that the new policy would only affect future transactions and would not be applied retroactively. That such an assurance is still being honored was not confirmed by the sources.

Bank Indonesia spokesman Difi Ahmad Johansyah said the rules were intended to keep banks in good health and engage in good corporate governance.

Difi also said Bank Indonesia had decided to exclude state-owned banks to avoid clashing with a law on state-owned enterprises. Difi said the ownership percentages had not been finalized, and Bank Indonesia was still reviewing the issue and conducting simulations.

Zulkifli Zaini, a director of Bank Mandiri, confirmed the central bank’s plan and welcomed the move to exempt state-owned banks. “These banks have a function as an agent of development,” he said. The central bank will again invite bankers to provide input, he added.

Sigit Pramono, chairman of the Indonesian Banking Association (Perbanas), expressed relief after hearing the central bank plan because of its focus on banking health.

“It’s all been associated with health and good corporate governance ratings, making it more positive,” he said. Sigit said banks deemed to be of moderate or high risk would have until December 2013 to improve.

Perbanas has conducted a simulation assuming the stock ownership restriction is applicable to all banks without exception. Sigit said the divestment burden would be very large and may involve assets of more than Rp 100 trillion ($10.6 billion). “In the end, bank shares would fall to a lot of foreigners, because only foreign capital is that deep,” he said.

SUMBER

1.       Present Continuous Tense

That such an assurance is still being honored was not confirmed by the sources.

= Itu seperti sebuah jaminan yang masih dihormati tidak dikonfirmasi oleh sumber.