www.thejakartaglobe.com - Jakarta/Singapore. Indonesia’s central
bank will cap single ownership of domestic banks at 40 percent under
new rules but allow exemptions that could pave the way for DBS Group’s
$7.2 billion bid for 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 fueled concerns Indonesia is becoming tougher on foreign
investment.(source)
Bank Indonesia said in a statement that listed
banks that are financially strong and have tier-1 capital ratio of more
than 6 percent will be allowed to own more than 40 percent. 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 percent, rose 1.1 percent in Thursday trade, while Danamon rose
1.6 percent. 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 percent of local banks, versus 30
percent in neighbor 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 percent of local banks, while non-financial
institutions can hold up to 30 percent and individuals only 20 percent.
The limits do not apply to state-owned banks such as top lender Bank
Mandiri.
“Banks can own more than 40 percent shares in [local]
banks’ capital as long as they obtain approval from Bank Indonesia,”
the central bank said in the regulation, adding such owners will still
need to have 20 percent listed after five years.
Under the new
rule, existing majority owners failing to meet Bank Indonesia’s top
standards for financial health will have to reduce their stakes to
comply with the limit by January 2019.
Bankers said the
regulator had balanced the need for financial health in the sector and a
clamor by nationalist politicians to limit foreign ownership against
the industry’s concerns that a lack of exemptions would lead to
destabilizing sell-offs in bank stakes and halt future investment.
Bank
Danamon’s CEO Henry Ho said the rules were now more transparent for
DBS, though he would not be drawn on whether they improved the chances
of a deal for Indonesia’s sixth-biggest lender.
“To go on with
the deal, we are still evaluating the impact [of the rule]... It is
certainly clearer,” said Ho, after the bank announced a
better-than-expected 36 percent rise in first half profits.
A DBS spokeswoman said it would review the regulations and continue to work closely with Bank Indonesia on the next steps.
DBS
plans to buy the 67.4 percent stake in Danamon held by Singapore state
investor Temasek Holdings and offered a 52 percent premium to minority
shareholders when it announced the bid in early April.
The bid
soon ran into trouble as some local bankers and politicians said they
would oppose it, while Bank Indonesia said it would first finalise the
new bank ownership rule, one of a series of policy moves in 2012
worrying foreign investors.
DBS, still has to pass Bank
Indonesia’s “fit and proper” test, said a source with direct knowledge
of the deal, which would be Asia’s fourth-biggest ever banking deal.
Other
foreign owners of significant stakes in Indonesian banks include
Australia and New Zealand Banking Group, Malaysia’s Maybank and private
equity firm TPG Capital .
“It seems they have kept the door
open by not differentiating between foreign and local owners,” said a
banking analyst, who declined to be identified.
Reuters
Source: http://www.thejakartaglobe.com/business/indonesias-new-bank-ownership-rules-leave-door-open-for-dbs-deal/531566 - July 19, 2012
No comments:
Post a Comment