SBY hopes DBS deal can be resolved soon

Satria Sambijantoro and Tassia Sipahutar, The Jakarta Post, Jakarta | Headlines | Wed, April 24 2013, 8:49 AM

A- A A+

Paper Edition | Page: 3

President Susilo Bambang Yudhoyono has called for a swift resolution to the planned acquisition by Singapore’s DBS Group Holdings Ltd. of Bank Danamon, a move that suggests possible political intervention in the high-profile banking takeover.

Yudhoyono said he hoped that the deal could be resolved in a “very short time”, after it had already been stalled for one year. DBS Group’s plan to acquire a 99 percent stake in Bank Danamon for US$6.8 billion was announced in April last year.

“I hope it will move forward,” Yudhoyono said on Tuesday in Singapore, as quoted by Reuters newswire. Nevertheless, the deal had to have benefits for all parties involved, he added.

The institution with the final say on the acquisition plan is the central bank, Bank Indonesia (BI), the nation’s banking regulator whose independence is guaranteed by law, meaning that BI does not take orders from the President. BI has set an ownership cap of 40 percent on local banks, but has the discretionary power to make exemptions for certain banks with sound capital and healthy conditions.

Political pressure surrounding the takeover bid has been immense, with BI Governor Darmin Nasution once acknowledging that the deal had turned “political”.

While the President called for a swift resolution, lawmakers and local bankers have openly urged BI not to make any hasty decision on the deal, expressing their concerns over the overwhelming dominance of foreign lenders in Indonesia’s banking industry.

Meanwhile, Darmin told reporters last week that the deal would be resolved in early May. He did not say whether it would be approved or rejected, arguing that BI still had to settle certain issues with the Monetary Authority of Singapore (MAS), the island state’s central bank, before the deal could proceed.

BI is believed to be using the deal to assist Indonesian lenders to expand in Singapore through reciprocal treatment. State-run Bank Mandiri and Bank Negara
Indonesia (BNI), two of the archipelago’s top five banks, have frequently complained about the difficulties in expanding their business in Singapore, despite the leniency given to foreign banks operating in Indonesia.

However, the Singaporean central bank has “softened” on the possible expansion of Indonesian banks there, according to Sofyan Basir, the president director of state-run Bank Rakyat Indonesia (BRI), which also plans to establish a business in Singapore.

If DBS Group’s acquisition plan for Bank Danamon is approved by BI, then the two banks will most likely merge, according to Bank Danamon president director Henry Ho.

He said that BI’s approval of the deal would benefit all stakeholders involved, including Indonesia’s banking industry.

“It [the acquisition] gives Danamon a stronger position to hopefully raise funding at a cheaper cost,” he told reporters last week. “And, of course, as DBS has a regional network, it can also help Danamon with the trade-finance business.”

Posted in: