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Ada Pertanyaan? Hubungi Kami Christina Desy, Fathan Qorib
After already being discussed during the last administration, the draft bill on the second amendment to Law No. 7 of 1992 on Banking (“Banking Law”) has now been prioritized under the 2015 National Legislation Programs. The House of Representative (“House”) has established a working committee to progress the draft bill.The Committee is currently collating and consideringsuggestions from relevant stakeholders, including state-owned banks. Bank Mandiri, one of the biggest state-owned banks, has suggested the amendment prohibit bailouts for collapsing foreign banks in Indonesia, despite the fact that those banks handle Indonesian customers and could have a systemic impact on the national economy.
Budi Ginadi Sadikin, Bank Mandiri’s President Director, is asserting the importance of this provision based on the fact that the Indonesian banking industry is dominated by foreign banks. Of a total of 119 banks in Indonesia, 68 are foreign.
Reflecting on these numbers, Mr. Sadikin believes that a prohibition on bailout of foreign banks will better protect the government’s interests if one of those foreign banks was to collapse. In support of this view, Mr. Sadikin also referred to policy practiced in England, which refused to provide a bailout for Lehman Brothers’ in London.
Challenging Mr. Sadikin’s view, lawmaker Airlangga Hartarto(Commission XI)argues that the Lehman Brothers reference should only applied to branches of foreign banks. Meanwhile, there are many foreign banks in Indonesia operating as a subsidiary in the form of an Indonesian legal entity.
Regardless, Mr. Sadikin remains adamant that the prohibition be included in the amendment. According to Mr. Sadikin, these subsidiaries are currently controlled by foreign shareholders and there is always a possibility for them to withdraw their shares at any time.
In relation to the proposed bailout prohibition, Bank Indonesia (BI) has previously suggested a bail-in policy as has been recognized internationally, such as by state members of the G-20 and Basel Committee. Halim Alamsyah, Deputy Governor of BI, explained that this policy requires every bank to provide a certain amount of funds to deal with any crisis thus preventing systemic impacts on other banks. To that extent, the state will only act in a crisis if bail-in funds are insufficient.
(hot/kc)
Christina Desy, Fathan Qorib
After already being discussed during the last administration, the draft bill on the second amendment to Law No. 7 of 1992 on Banking (“Banking Law”) has now been prioritized under the 2015 National Legislation Programs. The House of Representative (“House”) has established a working committee to progress the draft bill.The Committee is currently collating and consideringsuggestions from relevant stakeholders, including state-owned banks. Bank Mandiri, one of the biggest state-owned banks, has suggested the amendment prohibit bailouts for collapsing foreign banks in Indonesia, despite the fact that those banks handle Indonesian customers and could have a systemic impact on the national economy.
Budi Ginadi Sadikin, Bank Mandiri’s President Director, is asserting the importance of this provision based on the fact that the Indonesian banking industry is dominated by foreign banks. Of a total of 119 banks in Indonesia, 68 are foreign.
Reflecting on these numbers, Mr. Sadikin believes that a prohibition on bailout of foreign banks will better protect the government’s interests if one of those foreign banks was to collapse. In support of this view, Mr. Sadikin also referred to policy practiced in England, which refused to provide a bailout for Lehman Brothers’ in London.
Challenging Mr. Sadikin’s view, lawmaker Airlangga Hartarto(Commission XI)argues that the Lehman Brothers reference should only applied to branches of foreign banks. Meanwhile, there are many foreign banks in Indonesia operating as a subsidiary in the form of an Indonesian legal entity.
Regardless, Mr. Sadikin remains adamant that the prohibition be included in the amendment. According to Mr. Sadikin, these subsidiaries are currently controlled by foreign shareholders and there is always a possibility for them to withdraw their shares at any time.
In relation to the proposed bailout prohibition, Bank Indonesia (BI) has previously suggested a bail-in policy as has been recognized internationally, such as by state members of the G-20 and Basel Committee. Halim Alamsyah, Deputy Governor of BI, explained that this policy requires every bank to provide a certain amount of funds to deal with any crisis thus preventing systemic impacts on other banks. To that extent, the state will only act in a crisis if bail-in funds are insufficient.
(hot/kc)