'Single presence policy' likely for private banks

'Single presence policy' likely for private banks

Urip Hudiono, The Jakarta Post, Jakarta

tate-owned banks may be exempted from the central bank's plan to
implement a "single presence policy" in the banking sector, which
bans a controlling shareholder from owning more than one lender,
a Bank Indonesia official said, citing their strategic status.

"The policy is actually intended to be implemented on private
banks, which are considered to be too numerous," BI deputy
governor for banking, Siti C. Fadjrijah, said on the sidelines of
a banking seminar on Thursday.

"For state-owned banks, from what I know, there is a plan to
release all (the government's ownership) in them, apart from
several banks. So the government will in the end only own two or
three banks."

With this situation, Siti acknowledged the possibility that
state-owned banks may be excluded from the "single presence
policy," although she added that the policy was still in its
early stages of discussion.

The exact definition of "controlling shareholders" to be used
in the policy would also be thoroughly studied to prevent
negative effects in the banking industry, she said, and there
have not as yet been any discussions between the central bank and
the Office of the State Minister of State Enterprises about the
fate of state-owned banks.

"We will accept any input and suggestions from all
stakeholders concerned with the policy," she said.

The government at present still has controlling stakes in Bank
Mandiri, Bank Negara Indonesia (BNI), Bank Rakyat Indonesia (BRI)
and Bank Tabungan Negara (BTN), which are, respectively, the
country's largest, third largest and fourth largest lenders.

It also retains minority stakes in Bank Permata, Bank
International Indonesia (BII), and Bank Niaga, while it offered
all its remaining stake in Bank Central Asia (BCA) to the public
earlier this year.

The central bank last year launched its Indonesian Banking
Architecture (API) that aims to consolidate by 2010 -- through
mergers and acquisitions -- the country's 134 banks to only two
to three international-class banks, three to five national banks,
with the rest downgraded to specialized or rural banks.

BI governor Burhanuddin Abdullah said on Tuesday that the
central bank may soon introduce the "single presence policy" to
speed up the process of consolidating the country's banking
sector into a healthier state.

Siti said that the policy would be for the benefit of the
banking industry, as it would help minimize the potential for
fraudulent banking practices.

"There were many cases in the past where those owning more
than one bank used these banks to shift funds around for
the purpose of covering up irregularities in their bookkeeping,"
she said.

"We expect the policy will prevent such cases from
reoccurring."