Leony Aurora, Jakarta – Major players in the banking industry have welcomed Bank Indonesia's effort to speed up the sector's consolidation through a new policy on the injection of funds into other banks, but urge for more incentives.
President director of Bank Negara Indonesia (BNI), the country's second largest lender, Sigit Pramono told reporters on Wednesday that relaxing of regulations was in line with the sector's wishes. "The push for banks to consolidate and the (previous) legal lending limit (LLL) policy contradicted one another," he said.
The central bank announced on Tuesday its new policy, which rules that money injected from one bank to another would not be calculated in its LLL, as long as financial reports of the corresponding banks were consolidated.
This opens the doors wide for banks to merge and buy other banks without stumbling on the LLL, which was previously set at 20 percent.
Bank Rakyat Indonesia president Rudjito said the new regulation enabled banks to decide whether to rely on internal growth or make other moves, such as acquiring or merging with other banks.
"The condition now is more open, more flexible," he said.
The banks have already started eyeing other players to decide which is the most suited to partner with.
Sigit said that BNI intended to acquire one bank this year to add value to its services before selling 30 percent of its shares in May or June.
"(With the acquisition) we expect our value to be better in the second public offering," he said.
Although the government in principle has approved the divestment plan, which is expected to raise some Rp 5 trillion (US$547 million), its continuance depends on the House of Representatives, Sigit said.
Last year the House rejected the government's request to sell its shares in BNI to cover the state budget deficit, citing unfavorable market conditions.
Banks that would be attractive to BRI are those with the same focus on micro, small- and medium-sized enterprises, said Rudjito.
"We have not invited partners, but the option is open." Meanwhile, to further accelerate the banking sector's consolidation, Sigit called on the government to offer more incentives, saying the government should lower the cost of converting ownership certificates for assets that change hands in a merger.
"Foreign countries do this type of thing to promote voluntary mergers," he said.
Another thing to consider is the appropriate time to forecast a new bank's financial performance.
"Take for instance NPL (nonperforming loans), the figure taken when a merger takes place would be very different from that taken after the whole process is finished."