Indonesia to allow state lenders to own multiple banks

Indonesia may allow state banks to have majority ownership of more than one lender. 

Indonesia's House of Representatives is currently drafting a new banking bill that would relax the so called “single presence policy” for state-owned lenders, which refers to a regulation that limits shareholders to holding a majority stake in only one bank.

This is meant to better supervise the country’s banking system and boost growth among state-owned lenders.

Bank Mandiri, Bank Negara Indonesia, Bank Rakyat Indonesia and Bank Tabungan Negara represent the nation’s four state banks. Cumulatively, they account for around a third of the country’s banking assets.

Private banks will remain barred from owning more than one bank.

“The government, through state-owned banks, is an agent of development for improving people’s welfare,” said Harry Azhar Azis, deputy chairman of the House’s Commission XI, which oversees finance and banking.

“That’s why we need them to get bigger,” Harry said, adding that private banks would not receive the same privilege.

Indonesia has 120 commercial lenders.

The new law would also allow the Deposit Insurance Agency to have majority shares in multiple banks, in line with its past role of bailing out lenders, Harry said.

The nation’s central bank, Bank Indonesia, introduced in 2006 the single presence policy in order to improve banks’ accountability, though the rule still allows conventional banks to have majority shares in other Islamic banks.

Banks that had the same majority shareholder were told to either merge, divest or acquire all shares in the other bank and make it a subsidiary in order to comply with the rule.

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