INDONESIA - BANKING - BI Delays Approval For DBS Acquisition

www.thejakartaglobe.com - Bank Indonesia will not approve DBS Group Holdings’ $7.3 billion acquisition of local lender Bank Danamon Indonesia until it clarifies foreign-ownership rules for Indonesian banks, the central bank head said on Friday.

Bank Indonesia will issue new bank ownership rules by the end of May before evaluating DBS’s planned takeover, BI Governor Darmin Nasution said.

The new ownership rules, he said, will ban non-financial institutions from owning a majority stake in a local bank, but will be more relaxed toward foreign and local banks owning a majority share.

“They have to wait until we finish it,” Darmin said. “This is for the sake of prudence, not because we are trying to block foreigners.”   (source)


The new rules, he said, will also include a multiple-license requirement, which means banks will need to acquire several separate licenses for different activities such as taking deposits, lending, setting up ATMs and opening branches in certain areas.

Indonesia currently offers only a single license for all services. It was not clear whether existing banks would need to apply for the multiple licenses.

Darmin said he had spoken with the Monetary Authority of Singapore concerning greater access for Indonesian banks in the city-state, the region’s financial hub.

“After that [is granted], then we can talk [about the acquisition],” he said.

At least two bids from Malaysian banks for separate Indonesian banks have also been put on hold by BI.

Darmin’s comments are in line with calls from lawmakers and local bankers to protect Indonesian lenders. The House of Representatives is weighing an amendment to the 2009 bank law that would limit single-entity ownership to a 20 percent stake and foreign investors to a 45 percent share in local banks.

A presidential decree in 2010 set the maximum private ownership — be it foreign or local — in banks at 99 percent, a holdover from the 1997-98 financial crisis when the majority of local banks collapsed and had to be bailed out by the government.

Since then foreign banks have come en masse, picking up local banks that were sold cheap by the government. Foreign financial institutions now hold 52 percent of total bank assets.

This has created resentment among local banks, which face difficulty with cumbersome multiple-licensing policies overseas. State-controlled Bank Mandiri, Indonesia’s largest bank by assets, has been especially vocal in this regard.

Despite concerns over the Danamon takeover, DBS’s chief executive, Piyush Gupta, is confident the acquisition will go through. He told Reuters this month that any rejection could hurt investor confidence in Indonesia.

Danamon is currently controlled by Temasek Holdings, Singapore’s sovereign wealth fund, which holds 67.4 percent of the lender. DBS will pay for the stake at Rp 7,000 a share via a stock swap that will result in Temasek owning 40 percent of DBS’s enlarged capital, up from 29 percent.

Danamon shares fell 6.4 percent to Rp 5,900 on the Indonesia Stock Exchange on Fri day.

Source : http://www.thejakartaglobe.com/business/bi-delays-approval-for-dbs-acquisition/514591  - April 27, 2012