Indonesia limits bank ownership

Banks can own only a maximum of 40% in another bank.

According to Nomura, Bank Indonesia has just issued the regulation that limits ownership in Indonesian banks. This rule applies to both foreign and local investors. Existing owners that own more than the limits below can keep their current ownership if they are categorized at “tier 1” or “tier 2” in financial health and have “Good Corporate Governance, GCG”, as defined by Bank Indonesia, by Dec 2013. Those categorized as tier 3-5 need to divest their ownership by 2018.

The summary of the ownership rule:

• Banks and financial institutions (local and foreign) can own a maximum of 40% in another bank.
• Banks can own more than 40% but subject to Bank Indonesia approval and that they satisfy other requirements, including but not limited to:

(1) Being a listed entity;
(2) Having tier-one capital of at least 6%;
(3) For foreign banks, obtaining “the recommendation” from their local regulator;
(4) A commitment to own the stake for a certain period, etc.
(5) Within five years, the acquired bank must be listed, with minimum free float of 20%.

• Non financial institutions can only own a maximum of 30%.
• Individuals can only own a maximum of 20%.
• Indonesian state-owned banks are exempted.