Indonesian Local banks ask for fair treatment overseas

Local banks ask for fair treatment overseas
Indonesian banks have called on the government to establish reciprocal banking relations with other countries to make it easier for them to open branches overseas.

Indonesian Association of State-owned Banks (Himbara) chairman Gatot M. Suwondo said in Jakarta on Monday that Indonesian banks should enjoy the same treatment that the Indonesian government extended to foreign banks.

He said that unlike in foreign countries, foreign banks faced no difficulties obtaining permits to open representative offices in Indonesia.

“We beg for a reciprocal principle; equal treatment so that Indonesian banks overseas can receive the same treatment as those enjoyed by foreign banks here,” Gatot said during a hearing with the House of Representatives.

Gatot, who is also president director of state-run Bank Negara Indonesia (BNI), said that BNI, Bank Rakyat Indonesia (BRI) and Bank Mandiri were currently facing difficulties in setting up representative offices in several countries.

Mandiri, for example, secured an operating permit to open a branch in Shanghai after waiting more than four years due to China’s tight regulations on foreign banks.

The concerns about the unfair treatment were also shared by several other bankers who said that the country’s banking regulator treated them unfairly, especially in terms of requirements foreign banks needed to meet to open branches here.

“The regulations are too loose here. Banks can open however many branches whenever,” Sigit Pramono, chairman of the Indonesian Banks Association (Perbanas), told reporters after the meeting, adding that banking regulators in several countries, including Malaysia and Singapore, had strict regulations on allowing foreign banks to open branches.

There are currently 10 foreign banks out of more than 100 commercial banks operating in the country, including Citibank, Standard Chartered, DBS and HSBC. The 10 banks’ assets totaled Rp 233.09 trillion (US$27.3 billion) as of March this year, or about 7.6 percent of the overall Rp 3,065.83 trillion total assets of the nation’s 121 commercial banks, Bank Indonesia’s (BI) latest data shows.

Foreign banks also face no barriers in acquiring ownership in national banks, Sigit said.

Although the proportion of foreign banks’ assets in the country’s banking industry is still relatively small, their presence has continually increased in recent years through the acquisition of shares in local banks, he said.

Examples include, among others, the fifth and ninth largest local lenders Bank CIMB Niaga and Bank Internasional Indonesia, which, respectively, are 95 percent controlled by Malaysia’s lending giants CIMB Group and Maybank. The eighth biggest bank by assets, Bank Permata, is owned by Standard Chartered Bank.

Finance Minister Agus Marto-wardojo spoke last Friday about the “freedom” that foreign banks and investors enjoyed in the Indonesian banking industry, which limited the room that national players had to grow. At present, foreign ownership in Indonesian banks can be up to 99 percent in Indonesia.

BI deputy governor for banking regulation Muliaman D. Hadad, who also attended the hearing, said the central bank was currently assessing the ideal portion of foreign ownership in banks and the regulations or requirements for foreign banks to set up offices in Indonesia.

Sources By Esther Samboh, The Jakarta Post, Jakarta | Tue, 05/24/2011 11:52 PM