Indonesia lawmakers consider more curbs on bank stakes held by foreigners

Mon Jul 21, 2014 2:36am EDT
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By Fathiyah Dahrul and Gayatri Suroyo

JAKARTA, July 21 (Reuters) - Indonesian lawmakers are considering a bill that will force foreign banks to sell down majority stakes in local lenders, which, if approved, would drive away the foreign capital needed to further develop the country's financial services sector.

The proposed restrictions would reduce the appeal of Indonesian banks for foreign investors as other Southeast Asian nations such as the Philippines and Thailand loosen foreign ownership rules in preparation for the region's economic integration.

The multi-party parliamentary commission overseeing banking and finance in Southeast Asia's largest economy is considering a bill that would make foreign banks sell down holdings in Indonesian banks to a maximum of 40 percent within a decade, deputy commission chairman Harry Azhar Azis told Reuters.

The central bank has since 2012 limited foreign banks' holdings in local lenders to a maximum of 40 percent. Foreign banks that own controlling stakes in Indonesian lenders include Malaysia's Malayan Banking Bhd, CIMB Group Holdings Bhd, and HSBC Holdings PLC.

The proposed bill also calls for investments by foreign banks to be evaluated according to "reciprocity" or whether Indonesian banks can have similar market access to these banks' home countries.

It also calls for foreign banks to be locally incorporated, which will force them to ring-fence a pool of capital in Indonesia to protect customers from losses if the lender runs into trouble overseas.

"We will push this," commission member Maruarar Sirait told Reuters. "It's good to limit foreign ownership of a bank to 40 percent so we can have at least 60 percent," he added.

The banking bill follows a wave of nationalist policies in the oil and mining sectors imposed by the outgoing government. These policies have diminished the economic appeal of the world's fourth most populous country for foreign investors.   Continued...