Equality urged in deciding 'anchor bank' criteria

Urip Hudiono, The Jakarta Post, Jakarta

Local private banks want Bank Indonesia (BI) to consider them along with larger state lenders when casting about for "anchor banks" during its planned consolidation of the banking industry.

Speaking during a discussion on Tuesday, the head of the National Private Banks Association's research unit, Cyrillus Harinowo, suggested BI take into account as many factors as possible in determining the criteria for anchor banks, to create a level playing field among lenders in the country -- be they state or private.

"The criteria, for example, should not be based mainly on the size of a bank's assets, but also on whether the bank can serve as a a role model for other banks," he said, arguing against a growing view that only large state banks are fit to become anchor banks.

Cyrillus, who is an independent commissioner at both private Bank Central Asia and state Bank Rakyat Indonesia, said the opportunity to become an anchor bank should be open to any bank with a large customer base, adequate infrastructure, a variety of banking services and solid human resources management.

"Most important is a strong commitment from the bank's management in taking on the public responsibilities of being an anchor bank," he said.

In an attempt to create a stronger and healthier banking industry in the country, BI introduced last year the Indonesian Banking Architecture (API).

Its grand aim is to streamline the country's banks -- there are currently about 130 -- through so-called "anchor banks", which will act in acquiring, or consolidating, other banks through mergers and acquisitions.

Under the API, BI expects that by 2010 the country will have three solid international banks with capital of over Rp 50 trillion (US$5.2 billion), five national banks with capital of between Rp 10 trillion and Rp 50 trillion, and 50 regional, cooperative and retail banks with capital of between Rp 100 billion and Rp 10 trillion.

Other banks with capital below Rp 100 billion will become rural credit banks and limited lenders.

The central bank plans to announce its criteria for anchor banks at each banking level next month.

BI governor Burhanuddin Abdullah earlier said anchor banks would be those that are "well managed, well capitalized, healthy and useful to society".

In terms of private banks, Cyrillus said there was currently one local private bank that fell into the national bank category, 49 into the regional, cooperative and retail bank class, and 40 banks that fell into the limited lender class.

Meanwhile, the chairman of House of Representatives Commission XI for financial affairs, Paskah Suzetta, warned the central bank to consider all possible risks in implementing the anchor bank concept.

"There could arise resistance from bank owners during the mergers and acquisitions, and a public misperception of banks that do not fit the criteria of anchor banks, both of which could have a negative effect on the country's banking industry," he said.

Paskah also mentioned the potential risk of the anchor banks' assets growing too large to be covered under the government's blanket guarantee, which starting this year will be implemented by the Deposit Insurance Agency.