I'nesian banks ready to thrive in S'pore
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Indonesia's local bankers say that they can compete with strong banks in Singapore, if the central bank - Bank Indonesia - can make the most of the DBS Group Holdings'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,” Bank Mandiri president director Zulkifli Zaini said in an interview with The Jakarta Post over the weekend.
“Just give us access there and let’s do banking in an open system.”
Many local commercial banking clients have utilised Singaporean banks for financial services, creating a potentially lucrative business if Indonesian banks could expand there, Zaini said.
Indonesia’s central bank is currently processing the Singapore-based DBS Group’s US$7.2 billion (Bt220.7 billion) offer to purchase a 67.5 per cent stake in Bank Danamon (BDMN), Indonesia’s sixth-largest lender by assets.
Bank Indonesia (BI) is reportedly utilising the bank takeover as a bargaining chip to assist Indonesian banks that want to expand in Singapore, given its protectionist policies, with BI Governor Darmin Nasution admitting last week that negotiations between the nations’ central banks had turned “political”.
Analysts, however, are questioning the ability of Indonesian banks to compete in Singapore, whose market is mature and whose banking system is currently packed with many well-capitalised international banks.
For instance, Indonesia’s largest lender by assets, Bank Mandiri, is only the seventh-largest bank by capital in Asean, lagging behind Singapore-based banks such as DBS, OCBC and UOB, all of which stand in the top three.
“The problem for Indonesian banks wanting to expand in Singapore is basically capital,” Gadjah Mada University economist A. Tony Prasetiantono said.
“Foreign banks [in Singapore] are huge in terms of capital, hence they are more efficient and can afford to have modern banking technology,” according to Prasetiantono.
However, Afien Yuni Yahya, the deputy general manager for trade services at Bank Negara Indonesia (BNI), disagreed.
BNI is the only Indonesian bank with a full banking license in Singapore.
“In terms of capital, we may lose to those foreign banks, but Indonesian banks have their own customer segment there: Indonesia-related clients,” he noted.
Yahya 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 (MAS), that nation’s central bank, have prevented BNI from giving the best service to the potential clients, Yahya 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,” Yahya said.
Given Singapore’s restrictive policies, analysts and banking stakeholders have urged BI not to approve the Danamon-DBS takeover before the Singaporean banking regulator lifts limits on Indonesian banks for so-called “reciprocal” treatment at the hands of the MAS.
Bank Mandiri’s Zaini said that such negotiation techniques had been successfully employed against the MAS by banking regulators in India and China.
The presence of the State Bank of India and the ICICI Bank in Singapore was attributed to the fact that the Indian banking regulator closed that nation’s doors to Singaporean banks wanting to expand to the South Asian country, Zaini argued.
“Realising this, the Singaporean banking regulator then changed its regulations and permitted the entry of the Indian banks,” he said.
