Indonesian banks prepare for Singapore

Indonesian banks can compete with Singapore.

But Bank Indonesia must make the most of the DBS Group Holdings Ltd.’s takeover plan to give Indonesian banks greater access in the city state.

“We are not worried about competition with big, foreign banks in Singapore, as we have proven that we can grow rapidly here in Indonesia,” said Bank Mandiri president director Zulkifli Zaini.

“Just give us access there and let’s do banking in an open system.”

Many local commercial banking clients have utilized Singaporean banks for financial services, creating a potentially lucrative business if Indonesian banks could expand there, Zulkifli said.

Indonesia’s central bank is currently processing the Singapore-based DBS Group’s US$7.2 billion offer to purchase a 67.5 percent stake in Bank Danamon, Indonesia’s sixth-largest lender by assets.

BI is reportedly utilizing the bank takeover as a bargaining chip to assist Indonesian banks that want to expand in Singapore, given its protectionist policies.

Analysts, however, feel that Indonesian banks are small compared with those from Singapore.

“In terms of capital, we may lose to those foreign banks, but Indonesian banks have their own customer segment there: Indonesia-related clients,” said Afien Yuni Yahya, the deputy general manager for trade services at Bank Negara Indonesia.

Afien said that clients with Indonesian connections actually wanted to be served by Indonesian banks.

However, restrictive banking regulations applied by the Monetary Authority of Singapore, that nation’s central bank, have prevented BNI from giving the best service to the potential clients, Afien said.

“For example, the authority limits BNI to having one branch only. Given such a fact, many of our potential clients opt for another bank that has many branches to ease their banking transactions,” Afien said.

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