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Malaysia and Indonesia agree on easing of banking restrictions

Asia
Uncategorized
Expansion, Regulatory & Government

(15 February 2016 – Asia) Indonesia’s central bank, the Financial Services Authority (OJK) will sign an agreement soon with its Malaysian counterpart, Bank Negara Malaysia (BNM), to ease restrictions for Indonesian banks operating there.

The bilateral deal, expected to be signed in the first quarter of this year, will ensure Indonesian banks are on an equal footing with domestic lenders, amid complaints of difficulties operating fully in Malaysia.

The equal treatment will include ATM installations and payment services fees, said OJK chairman Muliaman D. Hadad, without disclosing further details.

“Many elements [of Indonesian banks’ business] will be treated the same as for local banks in the upcoming agreement,” Muliaman said.

Both authorities are scheduled to sign the bilateral agreement soon, after recently completing prolonged negotiations on licenses and operations of foreign banks ahead of the ASEAN Economic Community’s (AEC) liberalization of banking and financial services in 2020, he added.

Indonesian banks have complained that current regulations make it hard for them to operate in Malaysia, with a high minimum capital requirement of 300 million ringgit for a licensed bank — including locally incorporated foreign banks.

With the call for financial integration in ASEAN, Malaysia has agreed to ease restrictions imposed on Indonesian banks operating in the neighboring country following complaints of unequal treatment in comparison with other foreign banks.

The upcoming bilateral agreement with Malaysia will be a more detailed deal to follow up a memorandum of understanding (MOU) signed by OJK’s Muliaman, Bank Indonesia governor Agus Martowardojo and BNM governor Zeti Akhtar Aziz in 2014.

That deal highlighted a commitment by both countries’ banking authorities to uphold equal reciprocity and national treatment whenever banks from either country wished to enter or expand their operations in each other’s jurisdiction.

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