BI to increase bank capital requirements 10-fold<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The central bank laid out on Friday a blueprint for the
\nbanking sector, which includes higher minimum capital
\nrequirements -- a move which could lead to more bank mergers in
\nthe future.<\/p>\n
Under the new measures, outlined in "The Indonesian Banking
\nLandscape", banks have seven years to meet the new requirement,
\nwhich increases the minimum capital requirement from Rp 10
\nbillion (about US$1.2 million) currently to Rp 100 billion.<\/p>\n
"This forms a significant part of this program, as part of
\ngradual efforts to improve the financial soundness of the banking
\nsystem," Bank Indonesia's governor Burhanuddin said.<\/p>\n
In case they fail to meet the requirement, the central bank
\nwill only allow them to operate in limited areas, which
\nBurhanuddin referred to as "community banks."<\/p>\n
As many small banks operating in the country are still
\nstruggling to improve their capital health, the new ruling may
\nforce them to seek mergers to boost their capital.<\/p>\n
Currently, there are 138 banks operating in the country, with
\n55 of those that have capital below the new requirement. The 55
\nbanks include a foreign bank, 4 joint-venture banks (foreign and
\nlocal), 41 private local banks and 9 provincial banks,
\nBurhanuddin said, while refusing to name them.<\/p>\n
The Indonesian Banking Landscape was the latest measure
\nintroduced by Bank Indonesia to help improve the financial health
\nof local banks, as many are still suffering from the devastating
\ncrisis.<\/p>\n
The Landscape aims to build a sound, strong and efficient
\nbanking industry in stages within ten years. A resilient banking
\nindustry is expected to become a key element in promoting
\neconomic growth and supporting financial stability in the
\ncountry.<\/p>\n
As the financial crisis clearly exposed the vulnerability of
\nthe country's banking industry to external shocks, the central
\nbank said the new ruling provided a policy direction to minimize
\nimpacts that may arise in any recurrence of crisis.<\/p>\n
Under the program, in the next 5 to 10 years, banks in the
\ncountry would be divided into four groups in terms of assets, he
\nadded.<\/p>\n
The first group would consist of two or three banks with
\ninternational standards with the capital of at least Rp 50
\ntrillion. National banks with a capital of between Rp 10 trillion
\nto Rp 50 trillion are categorized in the second group. Three to
\nfive banks are expected to join this group.<\/p>\n
The third group would comprise of 30 to 50 banks with a
\ncapital of Rp 100 billion to Rp 10 trillion. The last group with
\na capital of below Rp 100 billion would be categorized as
\ncommunity banks or rural banks.<\/p>\n
The application of international best practices, including the
\n25 Basel Core Principles for effective banking supervision would
\nalso be accelerated under this program.<\/p>\n
Main goals of the Indonesian Banking Landscape<\/p>\n
1. Creating sound banking structures that promote national
\neconomic growth and international competitiveness;
\n2. Establishing effective regulatory system capable of
\nanticipating developments in the domestic and international
\nfinancial markets;
\n3. Setting up of independent and effective system for bank
\nsupervision;
\n4. Strengthening of internal conditions in the banking industry;
\n5. Creation and reinforcement of the supporting infrastructure
\nfor the banking industry; and
\n6. Protection and empowerment of customers.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bi-to-increase-bank-capital-requirements-10-fold-1447893297",
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"sponsor": "Okusi Associates",
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