OJK to require foreign-owned banks to increase capital
(13 August 2015 – Indonesia) Indonesia’s Financial Services Authority (OJK) will soon expect foreign-owned local banks to improve their grades and inject extra capital or face business restrictions.
OJK chairman Muliaman D. Hadad said the financial regulator would contact the foreign-owned banks with the requirements to increase capacity through capital injection so they can cover more business activities.
The lenders to be summoned include those currently in the BUKU I and BUKU II categories, two of four groupings that divide lenders according to their core capital.
BUKU I is the lowest category and lists banks with core capital below Rp 1 trillion (A$100.97 million), followed by BUKU II with core capital between Rp 1 trillion and Rp 5 trillion.
BUKU III category includes banks with core capital between Rp 5 trillion and Rp 30 trillion and BUKU IV — the highest — catalogues banks whose core capital exceeds Rp 30 trillion.
Each category determines the activities that the banks can engage in.
Of the 52 banks in the BUKU I category and 45 banks in the BUKU II category, dozens are majority-owned or controlled by foreign shareholders, including Bank Woori Saudara, Bank Andara, Bank of India Indonesia, Bank SBI Indonesia, Bank KEB Hana, Bank Nusantara Parahyangan and Bank Rabobank International Indonesia.
Their current status allows them to perform only basic activities such as collecting third-party funds, distributing loans and selling treasury notes, while other operations require approval from the OJK or Bank Indonesia (BI).“
“These small banks must rise grades and enter the BUKU III or BUKU IV league within a period of three to four years.
“They must also shift business to facilitate trade finance and investment from the current focus on the consumer and micro segments,” Muliaman said.
Higher capacity, he added, would enable the banks to attract foreign funds into the country.
Subscribe