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Bank Indonesia, the country's central bank, needs the support
of the government if its efforts to consolidate the banking sector are
going to succeed, a grouping of national banks says.
Chairman of the Indonesian Banks Association (Perbanas), Sigit Pramono,
said Tuesday the central bank should cooperate with the tax office, for
example, to promote tax incentives for merger and acquisition
activities to smoothen the consolidation program.
The tax office is under the Finance Ministry.
In an attempt to consolidate the banking sector, which currently has
more than 100 banks, the central bank has introduced a slew of
regulations promoting mergers and acquisitions.
The regulations range from increasing the banks' minimum capital
requirements to the introduction of the so-called single presence
policy, which basically bans an investor from owning a majority stake
in more than one bank.
However, while the deadline for the single presence policy has been set
at 2010, the progress thus far has been slow, with many attributing it
to the absence of incentives for banks to merge.
"It shows there's no shared understanding yet between the government
and Bank Indonesia on banking consolidation," Sigit said.
In addition, he said, there should be a pioneer in merging large banks
so the policy could be applied easier on a wider scale.
"It's the government that owns most banks here, followed by foreign
investors and the private sector. If there's no pioneer, it will be
difficult to encourage mergers."
Sigit's remarks came days after Temasek Holdings, the Singaporean
government's investment arm that indirectly owns a majority stake in
Bank Internasional Indonesia (BII) and Bank Danamon, said it would sell
its stake in BII rather than merge the two banks in response to the
policy.
BII is the country's sixth largest lender, while Danamon is the fifth.
Khazanah Berhard, the Malaysia-based investment firm that controls a
majority stake in Bank Niaga and Lippo Bank, has said it is still
weighing whether to merge the banks or sell its stake in one of the two.
Both Niaga and Lippo are among the country's ten largest banks.
The government, which owns several banks, is yet to decide how to
respond to the policy.
The government is currently the controlling shareholder in Bank
Mandiri, Bank Negara Indonesia (BNI) and Bank Rakyat Indonesia (BRI).
Bank Indonesia's director of research and regulations, Halim Alamsyah,
said that while the progress has been slow, the central bank was upbeat
the policy would eventually prevail.
He said Bank Indonesia and the government had been in talks to improve
coordination, and had discussed possible tax incentives for mergers.
According to Halim, the tax office is now formulating an incentive
scheme to be announced soon.
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