Indonesia's central bank will cap single ownership of domestic banks at 40 per cent under new rules but allow exemptions that could pave the way for DBS Group's US$7.2 billion (S$9.0 billion) bid for PT Bank Danamon to proceed.
The long-awaited regulation announced on Wednesday is aimed at preventing lenders in the fast-growing G20 country falling captive to single interests and ensuring a diverse shareholder base to hold management accountable.
But the rules, which come on the back of ownership restrictions on mining companies, have fuelled concerns Indonesia is becoming tougher on foreign investment.
Bank Indonesia said in a statement that listed banks that are financially strong and have tier-1 capital ratio of more than 6 per cent will be allowed to own more than 40 per cent. It did not specify how much.
Though on expected lines, that is likely to be a relief for Singapore's DBS, which embarked on the biggest ever takeover of an Indonesian company three months ago, and for foreign banks such as
Standard Chartered that own substantial stakes in the nation's lenders.
"The ability to approve higher thresholds looks like it may have the DBS merger in mind," said Joel Hogarth, a partner at O'Melveny and Myers law firm in Jakarta.
Shares in DBS, Southeast Asia's largest lender which has a tier-1 capital ratio of 12.7 per cent, rose 1.1 per cent in Thursday trade, while Danamon rose 1.6 per cent.
The muted reaction showed investors have mostly priced in the deal.
After a slew of bankruptcies in the 1998 financial crisis, Indonesian banks have vastly improved their financial health and become a magnet for foreign investment, leading some analysts to speculate the central bank's initial plans for a cap without exemptions were targeted at limiting foreign ownership.
Eight of Indonesia's top 11 banks by market value now are either controlled by foreign banks, business families, private equity firms or wealth funds in one of the region's most open banking sectors.
Foreign entities are currently allowed to hold up to 99 per cent of local banks, versus 30 per cent in neighbour Malaysia.
"I think the foreign investor community, both the foreign banks that are currently there and foreign banks looking to enter the market, will be breathing a sigh of relief and this should avoid the serious negative consequences to the reputation of Indonesia," said Jake Robson, a partner at Norton Rose in Singapore.
BALANCING ACT
Bank Indonesia, the country's banking regulator, said financial institutions can hold up to 40 per cent of local banks, while non-financial institutions can hold up to 30 per cent and individuals only 20 per cent.
The limits do not apply to state-owned banks such as top lender Bank Mandiri
No comments:
Post a Comment