Bank Indonesia defended the country’s lenders from suspicions that they may be colluding in setting rates. Nawir Messi, chairman of the Business Competition Supervisory Commission (KPPU), told that the banking sector was controlled by 14 major lenders out of 121 banks total, and that kind of structure was prone to unfair practices. KPPU’s 2009 study revealed that the country’s top 14 banks controlled 69 percent of assets in the sector.
On Wednesday, the KPPU announced it would probe the banking sector because lending rates were too high, possibly due to anti-competitive practices.
According to the KPPU’s study, Indonesia’s banking sector had a net interest margin of 5.6 percent from 2007 to 2009, bigger than its peers in Vietnam (3.3 percent) and South Korea (2.4 percent). Net interest margin is the spread between the rate banks charge for loans and what they pay on deposits.
The KPPU report also revealed that local banks’ ratio of operational costs to revenue was around 80 percent, higher than Malaysia’s 40 percent, Singapore’s 42 percent and Thailand’s 54 percent.
The central bank last year ordered the nation’s lenders to announce their prime lending rates to consumers starting on March 31 to boost transparency and competition.
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