Banking industry welcomes central bank's new lending policy

Banking industry welcomes central bank's new lending policy

Leony Aurora, The Jakarta Post/Jakarta

Major players in the banking industry have welcomed Bank
Indonesia's effort to speed up the sector's consolidation through
a new policy on the injection of funds into other banks, but urge
for more incentives.

President director of Bank Negara Indonesia (BNI), the
country's second largest lender, Sigit Pramono told reporters on
Wednesday that relaxing of regulations was in line with the
sector's wishes.

"The push for banks to consolidate and the (previous) legal
lending limit (LLL) policy contradicted one another," he said.

The central bank announced on Tuesday its new policy, which
rules that money injected from one bank to another would not be
calculated in its LLL, as long as financial reports of the
corresponding banks were consolidated.

This opens the doors wide for banks to merge and buy other
banks without stumbling on the LLL, which was previously set at
20 percent.

Bank Rakyat Indonesia president Rudjito said the new
regulation enabled banks to decide whether to rely on internal
growth or make other moves, such as acquiring or merging with
other banks.

"The condition now is more open, more flexible," he said.

The banks have already started eyeing other players to decide
which is the most suited to partner with.

Sigit said that BNI intended to acquire one bank this year to
add value to its services before selling 30 percent of its shares
in May or June.

"(With the acquisition) we expect our value to be better in
the second public offering," he said.

Although the government in principle has approved the
divestment plan, which is expected to raise some Rp 5 trillion
(US$547 million), its continuance depends on the House of
Representatives, Sigit said.

Last year the House rejected the government's request to sell
its shares in BNI to cover the state budget deficit, citing
unfavorable market conditions.

Banks that would be attractive to BRI are those with the same
focus on micro, small- and medium-sized enterprises, said
Rudjito.

"We have not invited partners, but the option is open."

Meanwhile, to further accelerate the banking sector's
consolidation, Sigit called on the government to offer more
incentives, saying the government should lower the cost of
converting ownership certificates for assets that change hands in
a merger.

"Foreign countries do this type of thing to promote voluntary
mergers," he said.

Another thing to consider is the appropriate time to forecast
a new bank's financial performance.

"Take for instance NPL (nonperforming loans), the figure taken
when a merger takes place would be very different from that taken
after the whole process is finished."