Indonesia to limit bank ownership

Indonesian central bank will cut ownership of individual investors on commercial banks so as to make banking sector more financially prudent.

Bank Indoenia Governor Darmin Nasution said that the rules, which could take affect in the fourth quarter, is aimed at preventing a handful of investors from controlling or dominating a bank.

Indonesia's banking sector is unique in that investors, including foreigners, can hold up to 99% stake.

Malaysia, which is known to have a relatively tight banking policy, has a 10% threshold for individual investors and 20% for institutions to own stake in banks.

There are about 100 commercial banks in Indonesia. Of these, 47 are either partly or majority-owned by foreigners, the Jakarta Globe reported.

Nasution explained that the affected banks would be given 'a long period of transition time' after the rule is passed, so that the affected investors can sell their stakes to whomever they choose. State-controlled banks would be exempted. The ruling would be made retroactive, Darmin said, meaning the current majority investors in banks will have to sell off their shares to other shareholders.

But for Nasution, the moves were all about 'promoting prudent banking'. He noted that the changes would bring Indonesia's bank ownership policies in line with most other countries.

The full story is available at Xinhuanet.