Indonesia regulator open to higher foreign stakes in local banks

[JAKARTA] Indonesia's financial regulator is open to allowing a higher percentage of foreign ownership in local banks as the country wants to tap international funds for trade and project finance.

The Southeast Asian nation currently limits foreign purchases of domestic banks to 40 per cent and will consider more than that depending on an investor's business plan, Muliaman Hadad, chairman of the Financial Services Authority, said on Wednesday in an interview.

"I think we are quite open to the next step of more than 40 per cent," Mr Hadad said in Singapore, where he attended the opening of a PT Bank Rakyat Indonesia branch. "Basically we asked foreign banks to go into areas that we want to see domestically, in particular to support trade finance, project finance." Mr Hadad didn't say how much more the authority would allow in terms of foreign holdings. The regulator, known as OJK, last month gave South Korea's Shinhan Bank approval to own more 40 per cent as it's looking to merge two small Indonesian lenders.

Regulators are trying to drive banking consolidation and have lifted capital requirements in Southeast Asia's largest economy, which has more than 100 lenders. International banks including Mitsubishi UFJ Financial Group Inc, Japan's biggest, have expressed interest in buying in Indonesia.

"Basically we have the 40 per cent rule," Mr Hadad said. "But then you have to enter the next step, to see whether you are serious, whether you have a concept of what you are going to do."

BLOOMBERG