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Indonesian government urged to limit foreign ownership in banking

Publication Date : 21-02-2013

 

Head economist at Indonesia's state-owned Bank Negara Indonesia (BNI) Ryan Kiryanto said on Wednesday that foreign ownership in the banking sector in the country should be limited to only a 49 per cent share at a maximum, with shares being acquired in stages.

Even the 49 per cent limit on foreign ownership in the banking sector was still far higher compared to other countries, he added.

In Malaysia, for example, foreign investors can acquire only 17 per cent shares of a bank in the country. Meanwhile in Australia, foreigners are allowed to acquire 35 per cent shares.

“Australia is liberal. However, foreign ownership in the banking sector in the country is very restricted,” Kiryanto went on.

Should the government agree to revise the current regulation on foreign ownership in the banking sector, it must introduce the revised regulation to all related stakeholders so that the markets would not respond negatively, he added.

“The shares of ownership in a corporation should be evenly distributed to prevent it from being dominated. With more effective monitoring, the management of the bank can be more professional,” said Kiryanto.

He said that Indonesia’s impressive economic growth of more than 6 percent had attracted foreign investors to invest in the country, particularly in its banking industry.

Referring to the current banking crisis in Europe, Kiryanto said it was a fact that foreign ownership was a double-edged sword. On one side, it could draw capital and technological support needed to further develop the banking business.

“But on the other, such ownership can be dangerous for a country, particularly during a global financial crisis. We can see the terrible situation in the recent banking crisis in Europe,” he said.

Deputy chairman of Indonesia's House of Representatives Commission XI overseeing finance and banking Harry Azhar Azis said in a previous statement that the House had yet to make a decision on the maximum limit of foreign ownership in the country’s banking sector.

“We have yet to decide whether foreign investors are allowed to acquire 49 per cent shares, or only 25 per cent. We also haven't yet reached an agreement on which one of the two institutions - BI [Bank Indonesia] or the OJK [Financial Service Authority] - should develop regulations relating to foreign ownership in the banking sector,” he said.

 

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