New bank capital requirement set at Rp1t
New bank capital requirement set at Rp1t
JAKARTA (JP): Bank Indonesia, the central bank, will raise the
minimum paid-up capital requirement for domestic banks to Rp 1
trillion (US$125 million) from Rp 50 billion and Rp 150 billion
at present to strengthen the country's banking system.
Bank Indonesia Governor J. Soedradjad Djiwandono said
yesterday the paid-up capital requirement would be Rp 1 trillion
by the end of this year, Rp 2 trillion by the end of 1999 and Rp
3 trillion by the end of 2003.
He said the National Economic and Financial Resilience Council
made the decision at a meeting chaired by President Soeharto
yesterday.
"The decision is expected to accelerate mergers among banks so
that our banking industry will become stronger with a bigger
capital base," Soedradjad said at a media conference after the
meeting.
Officials who attended the media conference included the
council's secretary-general, Widjojo Nitisastro; council vice
secretary-general Fuad Bawazier, who is also director general of
tax, and council member A. Subowo, who is also chairman of the
National Banking Association.
At present, the government requires a Rp 150 billion minimum
paid-up capital requirement for new foreign-exchange banks and Rp
50 billion for non-foreign exchange banks, which deal only in
rupiah.
Soedradjad said the planned capital regulation would not allow
for different paid-up capital requirements for each type of bank.
Subowo said the new regulation could force a reduction in the
number of commercial banks to 28 from the present 212 by the end
of the year.
He said only 10 or 11 banks currently had capital of more than
Rp 1 trillion.
Most private banks will have to merge with other banks or
invite foreign investors to enable them to meet the new capital
requirement, he said.
"We will have to quickly act to meet the requirement," he
said.
Subowo noted, however, that the existing law which limits
foreign ownership in local banks could hamper bank efforts to
attract foreign investors.
According to existing laws, foreign investors are allowed to
own up to 85 percent of a joint-venture bank while they are
limited to a 49 percent share of domestic banks.
Unlike local banks, joint-venture banks are only allowed to
operate in certain major cities.
Soedradjad promised that the government would propose an
amendment to the existing law in the House of Representatives to
enable foreign investors to buy greater shares of local banks.
He, however, refused to say what the penalty would be for
banks which fail to meet the requirements, but he said that no
banks would be liquidated.
"(There will be no liquidations) but acquisitions. If the
banks were liquidated, their workers would be laid off. But if
(the banks were) merged, workers would stay while the number of
directors would be reduced," he said. (jsk/prb)