The Minister of State-Owned Enterprises has asked Bank Indonesia for an extension for implementing the ‘Single Presence Policy’: Bank Indonesia Regulation No. 8/16/PBI/2006 on Single Ownership in Banking (the Single Ownership Regulation) will, as of December 2010, prohibit a single owner from being the majority shareholder in more than one Indonesian bank. That mandates a substantial undertaking for the state, which has a large presence in the banking sector.
Article 3 (1) gives any multiple-bank majority shareholders three options: (a) transference of shares or assets to another entity (e.g., divestment); (b) merger, acquisition, or consolidation, or; (c) establishing a Bank Holding Company, or assigning one of the controlled banks to be the Bank Holding Company.
Initially, many wondered if the regulation would apply to the Indonesian state, which controls majority shares in Bank Mandiri (66%), Bank Rakyat Indonesia (56%), Bank Negara Indonesia (76%), and Bank Tabungan Negara (73%). Although the process is complicated, and the four banks are some of the largest in the sector, Bank Indonesia has been clear: the state is no exception to the rule. Although the regulation allows applications for extension of the implementation deadline, Bank Indonesia has maintained that it will not give any favorable treatment, arguing that plenty of banks have already complied successfully.
The government at least appears to be leaning towards option (c) - establishing a limited liability (‘PT’) Bank Holding Company. The holding company would consolidate and exclusively control majority shares in the four banks, and, as the regulation requires, would be restricted from any other activities.Additional provisions about Bank Holding Companies are the subject of Articles 5 and 6 of the Single Ownership Regulation.
The regulation has been assessed by many as an effort to stimulate consolidations in the highly populated, often-less-than-scrupulous, and - as the Bank Century debacle would at least suggest - inadequately supervised banking sector.
Given the magnitude of the task, there is precious little optimism about the government and state-owned banks meeting the 31 December 2010 deadline.
This Indonesian Legal Brief is based upon research and interviews conducted by the hukumonline team.
The Minister of State-Owned Enterprises has asked Bank Indonesia for an extension for implementing the ‘Single Presence Policy’: Bank Indonesia Regulation No. 8/16/PBI/2006 on Single Ownership in Banking (the Single Ownership Regulation) will, as of December 2010, prohibit a single owner from being the majority shareholder in more than one Indonesian bank. That mandates a substantial undertaking for the state, which has a large presence in the banking sector.
Article 3 (1) gives any multiple-bank majority shareholders three options: (a) transference of shares or assets to another entity (e.g., divestment); (b) merger, acquisition, or consolidation, or; (c) establishing a Bank Holding Company, or assigning one of the controlled banks to be the Bank Holding Company.
Initially, many wondered if the regulation would apply to the Indonesian state, which controls majority shares in Bank Mandiri (66%), Bank Rakyat Indonesia (56%), Bank Negara Indonesia (76%), and Bank Tabungan Negara (73%). Although the process is complicated, and the four banks are some of the largest in the sector, Bank Indonesia has been clear: the state is no exception to the rule. Although the regulation allows applications for extension of the implementation deadline, Bank Indonesia has maintained that it will not give any favorable treatment, arguing that plenty of banks have already complied successfully.
The government at least appears to be leaning towards option (c) - establishing a limited liability (‘PT’) Bank Holding Company. The holding company would consolidate and exclusively control majority shares in the four banks, and, as the regulation requires, would be restricted from any other activities.Additional provisions about Bank Holding Companies are the subject of Articles 5 and 6 of the Single Ownership Regulation.
The regulation has been assessed by many as an effort to stimulate consolidations in the highly populated, often-less-than-scrupulous, and - as the Bank Century debacle would at least suggest - inadequately supervised banking sector.
Given the magnitude of the task, there is precious little optimism about the government and state-owned banks meeting the 31 December 2010 deadline.
This Indonesian Legal Brief is based upon research and interviews conducted by the hukumonline team.
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