Holding company for Indonesian state banks

JAKARTA • The Indonesian government plans to form a holding company that will own shares in all of the country's state-controlled banks by 2018 in a bid to make lenders more efficient and boost equity, an official at the state- owned Enterprises Ministry said yesterday.

Deputy Minister Gatot Trihargo said the government wants to set up an investment firm to work as the holding company for some of Indonesia's biggest banks.

Among those involved will be Bank Mandiri, Bank Rakyat Indonesia, Bank Negara Indonesia and Bank Tabungan Negara.

"With a holding company, we can strengthen recurring income," Mr Trihargo told reporters at a briefing. The ministry will either choose an existing state investment firm as the holding company, such as Danareksa, Bahana Securities or Perusahaan Pengelola Aset, or create a new firm altogether, he added.

The plans come as President Joko Widodo's administration steps up efforts to better manage state firms, drawing up plans to create a holding company for each sector where it has more than one firm, such as pharmaceuticals, mining and insurance.

Jakarta has also said it will privatise four fully-owned state firms, including heavily indebted carrier Merpati Nusantara Airlines, through strategic sales.

Banks in Indonesia, South-east Asia's largest economy, manage capital risks well, according to the country's central bank, with an average capital adequacy ratio at 21.1 per cent as of November last year, but are small compared to their peers in neighbouring countries.

The country's banking regulator and the central bank have both been pushing for banks to merge to shore up equity. The regulators want to halve the number of banks operating across the archipelago from around 120.

But Mr Trihargo said the government will drop a plan to merge all state syariah banks, and opt to look for investors from the Middle East to partner with those banks.


A version of this article appeared in the print edition of The Straits Times on February 17, 2016, with the headline 'Holding company for Indonesian state banks'. Print Edition | Subscribe