Authorities say Indonesia's new bank ownership rules are not protectionist measures

The new ownership rules, which aim to strengthen corporate governance within the entire banking industry, will be subjected to both local and foreign investors.

OCBC Treasury Research noted:

The authorities’ plan to revise the bank ownership rules has been in the pipeline for a while, and the BI has explicitly made it clear that the aim behind these moves is to strengthen corporate governance within the entire banking industry.

As it is, Indonesia may have some legacy issues from the 1997-98 crisis, following which bank ownership rules were broadly relaxed so as to attract new investors and help the under-capitalized banking system. Indonesia’s economic fundamentals have improved tremendously in recent years, and the introduction of the new bank ownership rules would only strengthen the stability of the economy further.

Our view is that the new rules are likely to provide a stronger anchor for stability in the banking system, especially if we consider the risk of sudden outflows of excessive foreign investment in the sector. Note that the major credit rating agencies have signaled the anticipated rules as a positive development for Indonesia sovereign credit standing.

Also, the Indonesian authorities have made it clear that the new bank ownership rules are not meant as protectionist measures. Indeed, this was also made clear by the fact that the new ownership rules will be subjected to both local and foreign investors.