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2-for-1 offer on Indonesian banks may come with double the trouble

Foreign banks stand to win management control if they buy and merge two local lenders, but tough reality awaits

Singapore

FOREIGN banks that have been frustrated trying to break into one of the world's most profitable countries for banking, Indonesia, now may have a way. Buy two lenders, merge them - you may get management control while Indonesia gets to cut its weakest players and consolidate its banking sector.

After Indonesia imposed rules three years ago that limited foreign ownership of its banks to 40 per cent, the ground shifted again this year. Regulators started saying that bidders could go above the threshold if they bought and merged two local lenders. At least two deals, by China Construction Bank Corp and Korea's Shinhan Bank, have been given the go-ahead.

"It may be an odd way of being allowed...

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