BI will probably limit majority bank shareholdings

JAKARTA (JP): Bank Indonesia, the central bank, will probably limit the ownership of institutions and individuals in banks to prevent the dominance of single majority shareholders, a senior official said yesterday.

The central bank's managing director for legal issues and supervision, Heru Soepraptomo, said a ruling on ownership limits was being formulated.

Ownership restriction was necessary to prevent majority shareholders from misusing bank assets for personal interests, he said .

"It will also protect customers from losing their money to fraudulent practices which may occur in the bank," he said at a monthly gathering of the Jakarta Lawyers Club.

The gathering was attended by lawyers T. Mulya Lubis and Denny Kailimang, who are club executives, and Rudy Lontoh and Gani Djemat.

Heru said the process of formulating guidelines to limit individual or institutional ownership was tough and would take some time.

Analysts have said Bank Indonesia should set up regulations on bank ownership to guarantee a fair distribution of the bank's lending to its customers.

They said majority shareholders often used their banks' funds to finance their own businesses despite the central bank's tight legal lending limits.

A Bank BNI executive, Remy Syahdeini, who also attended yesterday's gathering, said limiting ownership in banks would be good and bad.

"It would not be attractive to investors, especially big ones. But are big investors really necessary? Or are many small ones enough for the bank?" he asked.

He said that before issuing the regulation, banking authorities should determine whether such a limitation was necessary.

"I think the (1995) Law on Limited Liability Companies already protects the rights of minority shareholders. If they can use these rights properly, even 10 percent of their ownership can effectively dismantle a company's poor performing executives," he said.

Remy said he was more concerned about a bank's management than its ownership.

"If a bank is managed by real professionals, regardless of whether they have any connection with the majority shareholder, there is no problem. Decisions made by professionals are not influenced by shareholders," he said.

"It all comes back to the question of attitude," he said.

But Remy said it would be better if Bank Indonesia set up rules stipulating who could or could not manage a bank.

So a majority bank owner could still be free to make suggestions but keep within government guidelines.

Most commercial banks, even publicly listed ones, are controlled by an individual or business group. (pwn)