Indonesia allows foreign lenders to operate branch offices here without establishing a locally incorporated company, a policy often criticized by local lenders as paving the way for unfair competition and increased risk for Indonesian deposit holders.
Halim Alamsyah, a deputy governor at Bank Indonesia, said the minimum paid-up capital requirement for local banks — currently set at Rp 3 trillion ($318 million) for the establishment of a new conventional bank — would be applied in some form to foreign branch operators as well. (source)
“For branch offices of foreign banks, we will require a minimum paid-up capital at a certain level,” Halim said in Jakarta on Friday, without elaborating on what that level would be.
Currently, if a foreign lender operating here collapses, Bank Indonesia faces difficulties accessing the lender’s paid-up capital. Halim said the requirement was expected to act as a buffer and had been applied by other nations globally.
Foreign lenders that will be affected by the planned regulation include Citibank, HSBC, Standard Chartered, JPMorgan, Bangkok Bank and others.
Bank Indonesia no longer allows foreign lender newcomers to open branch offices here; they now must establish a locally incorporated company if they want to do business in Indonesia.
But the central bank has allowed foreign lenders with branches already established to remain.
Halim said a draft of the regulation was being reviewed by the board of governors at Bank Indonesia and would have to be signed by BI Governor Darmin Nasution.
The planned regulation is a follow-up of a deal reached by G-20 central banks in a forum earlier this year, intended as a precautionary measure to prevent a repeat of the 2008 financial crisis.
Source: http://www.thejakartaglobe.com/markets/foreign-banks-facing-paid-up-capital-rule-from-indonesian-government/537837 - Aug 13, 2012
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