It would relax the requirement for acquiring banks to merge local operations into one entity.
Bloomberg reports that Indonesia is planning to relax rules on bank mergers as part of an effort to encourage consolidation in an industry that has 115 conventional and Shariah banks and over 1,500 rural players.
The Financial Services Authority is expecting to amend the single presence policy later this year which would relax the longstanding requirement for acquiring banks to merge all their local operations into one entity, Heru Kristiyana, commissioner for banking supervision at the regulator told Bloomberg.
Introduced in 2006, the single presence rule has proven unpopular with a number of foreign banks seeking to expand their operations in Indonesia. In 2012, regulators set conditions for financial institutions to raise holdings in banks above 40% although the rule has since been relaxed, allowing Japanese megabanks like MUFG to take control of Bank Danamon Indonesia and Sumitomo Mitsui Financial Group Inc. to buy Bank Tabungan Pensiunan Nasional.
A report from Morgan Stanley identifies Indonesia as the ASEAN country with the second largest branch network in 2016, at around 12.56 branches per 100,000 of the population. This trails only behind Thailand which has 13.95 branches for every 100,000 people.
Consolidation has been moving at a snail’s pace as only a handful of banks have consolidated and around 90 rural lenders have shut down or winding down since the central bank rolled out a consolidation programme in 2005, Bloomberg data show.
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