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Ada Pertanyaan? Hubungi Kami Robert Sidauruk, Fathan Qorib
Foreign investors in the banking sectors can now breathe a sigh of relief, for a while at least, as the 2009-2014 House of Representative (House) has postponed its discussions on the Draft Bill on Banking (Draft Bill).
Going forward, the Draft Bill will become the responsibility of the newly elected lawmakers, including opening the possibility of a more flexible cap on foreign investment in banks now set at 40% under the current version of the Draft Bill.
“The Draft is yet to be passed by the House, it is now up to the new House [2014-2019] whether or not to add new provisions to the Draft Bill,” said Muhammad Hatta, lawmaker from the National Mandate Party (PAN) at the House’s secretariat on Thursday.
Mr. Hatta signaled that the Draft Bill will accommodate an opportunity for foreign investors to increase their investment in a bank to more than 40%, provided they satisfy three requirements on good corporate governance, capital adequacy, and national contribution. The House will have a final say on whether to approve or refuse any increase in capital participation.
“Foreign investors intending to increase their capital participation must seek approval from the House,” added Mr. Hatta.
The main objective in limiting foreign investment in the banking sector is to strengthen the implementation of the reciprocal principle. According to Mr. Hatta, the country of origin of foreign investors that wish to go beyond the 40% cap, must commit to giving the same flexibility to Indonesian banks in their own country.
“By this limiting provision, the House will assist local banks to expand their businesses,” said Mr. Hatta.
On a cautionary note, economist Aviliani reminded that limitations on foreign investment in the banking sector must be carefully regulated. This concern is based on an estimate that in 2015, the national banking industry will require additional capital investment of IDR 113 trillion to preserve a safe level of Loan to Deposit Ratio (LDR) at 90%.
“To maintain LDR at 90%, the banking sector requires investment injections of IDR 113 trillion, because the current capital market conditions will likely only provide investment of IDR 30 trillion,” informed Mrs. Aviliani.
Under such circumstances, Mrs. Aviliani suggested the House regulate other substantial matters rather than limiting foreign investment. Mrs. Aviliani believes that when it comes to the need for capital, the market will force banks to start consolidating.
Under the current Draft Bill Foreign ownership is capped at 40%. With this restriction, if foreign ownership in a commercial bank exceeds 40%, the foreign held shares over this threshold must be divested to Indonesian citizens or legal entities.
The Financial Services Authority (OJK) is, however, authorized to change the foreign ownership cap in a commercial bank with the approval of the House.
(For more information on the Draft Bill, see ILD No. 374)
(hot/kc)
Robert Sidauruk, Fathan Qorib
Foreign investors in the banking sectors can now breathe a sigh of relief, for a while at least, as the 2009-2014 House of Representative (House) has postponed its discussions on the Draft Bill on Banking (Draft Bill).
Going forward, the Draft Bill will become the responsibility of the newly elected lawmakers, including opening the possibility of a more flexible cap on foreign investment in banks now set at 40% under the current version of the Draft Bill.
“The Draft is yet to be passed by the House, it is now up to the new House [2014-2019] whether or not to add new provisions to the Draft Bill,” said Muhammad Hatta, lawmaker from the National Mandate Party (PAN) at the House’s secretariat on Thursday.
Mr. Hatta signaled that the Draft Bill will accommodate an opportunity for foreign investors to increase their investment in a bank to more than 40%, provided they satisfy three requirements on good corporate governance, capital adequacy, and national contribution. The House will have a final say on whether to approve or refuse any increase in capital participation.
“Foreign investors intending to increase their capital participation must seek approval from the House,” added Mr. Hatta.
The main objective in limiting foreign investment in the banking sector is to strengthen the implementation of the reciprocal principle. According to Mr. Hatta, the country of origin of foreign investors that wish to go beyond the 40% cap, must commit to giving the same flexibility to Indonesian banks in their own country.
“By this limiting provision, the House will assist local banks to expand their businesses,” said Mr. Hatta.
On a cautionary note, economist Aviliani reminded that limitations on foreign investment in the banking sector must be carefully regulated. This concern is based on an estimate that in 2015, the national banking industry will require additional capital investment of IDR 113 trillion to preserve a safe level of Loan to Deposit Ratio (LDR) at 90%.
“To maintain LDR at 90%, the banking sector requires investment injections of IDR 113 trillion, because the current capital market conditions will likely only provide investment of IDR 30 trillion,” informed Mrs. Aviliani.
Under such circumstances, Mrs. Aviliani suggested the House regulate other substantial matters rather than limiting foreign investment. Mrs. Aviliani believes that when it comes to the need for capital, the market will force banks to start consolidating.
Under the current Draft Bill Foreign ownership is capped at 40%. With this restriction, if foreign ownership in a commercial bank exceeds 40%, the foreign held shares over this threshold must be divested to Indonesian citizens or legal entities.
The Financial Services Authority (OJK) is, however, authorized to change the foreign ownership cap in a commercial bank with the approval of the House.
(For more information on the Draft Bill, see ILD No. 374)
(hot/kc)