Indonesia regulator may ease foreign ownership rules for Islamic banks

[JAKARTA] Indonesia's financial regulator said it may ease foreign ownership restrictions for Islamic banks - a move that could attract Middle Eastern lenders such as Bahrain's Al Baraka Banking Group.

Under a 2012 rule introduced amid calls by nationalist politicians to limit foreign ownership, an overseas bank can only own up to 40 per cent of an Indonesian lender.

Nelson Tampubolon, banking supervisor at Indonesia Financial Services Authority, said the regulator is looking at relaxing overseas ownership requirements in cases where a foreign bank plans to convert an Indonesian commercial lender to an Islamic one.

But certain conditions would apply, such as whether Indonesia already has a market access agreement with the foreign country and whether the foreign bank can bring in the expertise that local lenders lack, Mr Tampubolon told Reuters in a text message.

His comments follow remarks earlier this month that China Construction Bank Corp would be permitted to own more than 40 per cent of a merged Indonesian bank should it buy stakes in two separate lenders and combine them into a single entity.

Middle Eastern banks have shown "pretty strong" interest to expand in the world's most populous Muslim country, Tampubolon added.

A relaxation of the rule would help Bahrain-based Al Baraka with its plans to enter Indonesia's Islamic banking sector by as early as 2016, Chief Executive Adnan Ahmed Yousif told Reuters by email.

Al Baraka opened a representative office in Jakarta in 2008, which it has used to explore potential acquisition targets.

Last year Dubai Islamic Bank said it was seeking to raise its holding in PT Bank Panin Syariah Tbk to 40 per cent from 24.9 per cent.

REUTERS