Indonesia’s new bank ownership laws may cause capital divestment of up to $10.6b
Restrictions on foreign ownership of domestic banks likely to threaten Indonesia’s growth prospects as capital demands far exceed domestic funding capabilities. July 04, 2012 | Doron FooBank Indonesia’s (BI) decision to cap foreign ownership of domestic banks at 40% and for some, at 99%, provided they met three additional criteria, has had many in the financial industry breathing a sigh of relief. The additional criteria for 99% ownership of a domestic bank requires the buying bank to be healthy, publicly listed and agreeable to buy convertible debt securities that can be exchanged for equity. The new banking rules will affect domestic and foreign investors alike. Additionally, the bank ownership cap will be selectively applied to domestic banks depending on the banks’ health and corporate-governance ratings. A general domestic bank ownership cap of 40% for financial institutions, 30% for non-financial institutions and 20% for families will be applied. Figure 1: Assets of Indonesian banks with substantial foreign ownership in 2011 ($, bn) Widespread concern stemmed mainly from foreign Asian banks that possess significant ownership in domestic Indonesian banks and also those who are looking to enter this lucrative market. The country’s growing population, low retail banking penetration, emerging entrepreneurship, and a lack of quality infrastructure have all contributed to a strong demand for both retail and corporate banking services. This poses significant growth opportunities for foreign banks with sufficient capital, as profitability in their domestic markets increasingly saturates. BI hints at approval for DBS-Danamon deal The million-dollar question preying on everyone’s mind is whether the $7.8 billion bid by Singapore's DBS Group Holdings for Bank Danamon (Asia's fourth-largest banking deal) will go through. From Singapore’s point of view, the deal would represent a reshuffling of ownership from a private equity fund (Temasek Holding) to a banking entity that will provide syne... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Databook, Indonesia, Regulation, Risk and RegulationDatabook,Indonesia,riskregulation,Risk and Regulation, Databook,Indonesia,Regulation,Risk and Regulation, Keywords:DBS Bank, Danamon Bank, Maybank, CIMB, CoCo Bonds, RHB Bank, Bank Internasional Indonesia, CIMB Niaga DBS Bank, Danamon Bank, Maybank, CIMB, CoCo Bonds, RHB Bank, Bank Internasional Indonesia, CIMB Niaga
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