Indonesia central bank: Curbing foreign investment not our intention

Bank Indonesia’s bank ownership limit aimed to foster good governance in banking after fraud cases surfaced.

Bank ownership limits stance by Bank Indonesia (BI) is to breed good governance in the growing banking sector and it should not be perceived as a measure to discourage foreign ownership of local banks, an english daily Monday quoted central bank officials as saying.

It reported that the study on the new regulation focused on the limitation of single ownership in local banks.

The Jakarta Post quoted BI Governor Darmin Nasution as saying over the weekend that: "Bank Indonesia said it was assessing limits on bank ownership, but we do not intend to limit foreign (investors). We need to improve good governance in the banking industry."

Following the 1998 Asian financial crisis, which hit hard Indonesia's finance industry, the country liberalised the banking sector to spur interest in the industry, with investors enjoying the ability to own up to 99 per cent stake in local banks.

Interest in the nation's banking industry has grown rapidly, particularly from foreign ivestors with hefty capital, a stellar economic growth boosts banking businesses and the fact that Indonesia is home to some of the most profitable banks in the region.

As the industry grew rapidly, banks become the subjects of fraud with high-profile embezzlement scandals at Citibank and Bank Mega, as weel as the alleged masih fraud by the owners of Bank Century.

View the full story in Bernama.