Financial Service Authority (FSA) postponed the implementation of Basel III for Indonesian Bank. as part of the agency' stimulus for the financial sectors - Photo: Privacy
JAKARTA (TheInsiderStories) – Indonesia’ Financial Services Authority (FSA) will revise the single presence policy (SPP) to lessen the number of banks in Indonesia, as well as to speed up the process of consolidation in the domestic banking sector, said the FSA Deputy last week.
The old regulation, stipulated in Regulation No.39/POJK.03/2017, mandates big lenders should merge the two small banks through acquisition process. It asserts that one entity may only have control over one bank.
Deputy for Banking Supervision FSA Boedi Armanto says, the rule is not very flexible for fast-tracking consolidation. Therefore, the agency is offering leeway for large banks who has planning to acquire small banks by giving an option to turn the small banks into special satellite banks.
Chief executive of banking supervisory at FSA Heru Kristiyana added, the agency encouraged the banks to consolidate cause the number at present is too much, around 114 banks, with 82 lenders has status as BOOK I and BOOK II.
In the midst of the rapid development of the banking industry as it is today, ranging from interest rate competition and digitalization, these small banks must survive. If they cannot survive, according to Heru, they must immediately find a way out by increasing capital or finding partners.
Meanwhile, the Association of State Banks thought the FSA regulation of SPP hindered the process of downsizing the bank’ number. So far, each bank could only become a controlling shareholder of one bank.
Ownership of two banks could be done if one of them is a mixed bank or with sharia principles. If a majority stake holder of a bank wants to take over another bank, it has to choose one of the options which are merger, parent formation in banking, or holding function.
“The issue is, there are many banks must be merged, the SPP rules that required merging of banks, hinders the pace of domestic bank consolidation,” chairman of the association Kartika Wirjoatmodjo said last week.
Wirjoatmodjo thought, if the policy is revising, it could help the ideal number of Indonesian banks from 70 to 50 companies. He noted the downsizing number of the banks needed to be encouraged in order to increase the competitiveness of the domestic banks.
Right now, he said, there are too many banks in the country and makes the competition unbalanced, said the chairman. Among other things, it can be seen from the struggle for uneven liquidity between small and large bank groups.
Bank Mandiri it self, he said, is seeking a medium scale bank to support state-owned lender’ business. The investment to realize this plan is around Rp30 trillion (US$2.14 billion).
“We are looking mainly for strong ones in small medium enterprise, because we are more into corporations and state-owned enterprises,” said the CEO.
Beside Bank Mandiri, PT Bank Central Asia Tbk (IDX:BBCA) also intends to acquire small banks. The bank is PT Bank Royal Indonesia which is the process will be completed soon before June 2019.
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