BI will probably limit majority bank shareholdings

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)