'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."