Indonesian Bank-Owning Rules Not Regressive: Fitch’s Srivastava

Ambreesh Srivastava, Fitch Ratings’ head of financial institutions in South and Southeast Asia, says proposed rules capping ownership of Indonesian banks won’t be applied to current holdings and only to investments made after they become law.

Bank Indonesia deputy governor Halim Alamsyah last month proposed rules that would cap non-bank financial institutions’ ownership of Indonesian banks at 40 percent, non-financial companies’ ownership at 30 percent and families or individuals’ ownership at 20 percent.

Srivastava spoke at Fitch’s global banking conference in Singapore today.

On new ownership rules:

“The rules are not necessarily regressive. If it was on a retrospective basis, there would have been cause for concern. The good thing is it’s on a prospective basis. Indonesia, from a longer-term perspective, needs foreign capital to fund the growth opportunities in that economy. Going forward, foreign banks will have to strategize on their Indonesia plans.”

On Singapore-based DBS Group Holdings Ltd. (DBS)’s bid to buy a 67 percent stake in PT Bank Danamon Indonesia:

“If the regulations are taken at their face value, then the DBS-Danamon deal cannot go through in its present form. We don’t want to speculate what is going to happen there.”

On regional foreign-ownership rules:

“My sense is that Indonesia is now coming more in line with what’s going on in the region in terms of foreign ownership limits. Not surprisingly, they are trying to benchmark themselves against ownership limits in the region.”

On historical foreign ownership:

“In the aftermath of the Asian financial crisis, when the banking system was badly ravaged, they needed foreign capital. They were far more liberal. Many foreign institutions have close to 100 percent ownership in large institutions. Thirty percent of the banking system is in foreign hands. Clearly, as Indonesia has been doing a lot better in recent years, it has also become a nationalistic issue of sorts.”

To contact the reporter on this story: Sanat Vallikappen in Singapore at vallikappen@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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