KNEKS Warns of Impacts of UUS Spin-Offs: Many Small-Scale Sharia Banks

Jakarta — The National Committee for Sharia Economics and Finance (KNEKS) has highlighted potential impacts of the obligation to separate or spin off Sharia business units (UUS). Sutan Emir Hidayat, Director of Sharia Economic Infrastructure at KNEKS, said the spin-off policy could give rise to many small-scale Sharia banks. This would be at odds with regulator aims to require UUS spin-offs to promote consolidation so that Sharia financial institutions have larger and more competitive scales. ‘According to KNEKS’ studies, if the spin-off is carried out, small banks will emerge, effectively creating KBMI 1. Meanwhile, OJK is currently considering removing KBMI 1,’ Sutan said at a media briefing at SMBC Tower, Jakarta, on Wednesday (4 March 2026). He argued that instead of spin-offs, corporate actions should be pursued to grow UUS business scale. This is similar to what PT Bank Syariah Indonesia (Persero) Tbk has done. After the corporate action, BSI now has assets of Rp 456.2 trillion. This figure affirms BSI’s position as Indonesia’s largest Sharia bank and places it among the ten largest banks in the country by assets. ‘If you look at KNEKS’ study published a few years ago, we prefer corporate actions to spin-offs,’ Sutan said. UUS are required to spin off when their assets reach 50 percent or exceed 50 percent of the parent company’s total assets. Therefore, Sutan recommends that UUS spin-offs be undertaken considering the readiness of the UUS’s business scale and be combined with corporate actions. For example, PT Bank Syariah Nasional (BSN) was created through the spin-off of UUS PT Bank Tabungan Negara (Persero) Tbk – BTN Syariah – followed by the acquisition of PT Bank Victoria Syariah.