Indonesia Bank Ownership Limit Set to 40%

Indonesia will limit financial institutions’ ownership of banks to 40%, according to regulations signed by central bank Governor Darmin Nasution.

For institutions to exceed the limit they must be publicly listed and fulfill minimum capital obligations appropriate to their risk profile, according to the rules inked by July 13.

Under the rules, an owning bank must have tier-1 capital holdings of more than 6% and be committed to holding the purchased bank for a “certain period of time.” Foreign banks will need recommendations from their local financial authority and a purchased lender will need to sell at least 20% of its shares to the public within five years of the sale.

The new ownership rules for banks in Southeast Asia’s largest economy, which may affect acquisitions including DBS Group Holdings Ltd.’s bid for PT Bank Danamon Indonesia, were expected before the end of the month.

Singapore’s DBS made a IDR66 trillion rupiah bid for PT Bank Danamon Indonesia Tbk on April 2, triggering proposals from Bank Indonesia’s officials to restrict the shareholding of local lenders by other financial institutions. The possible limit led traders to bet that the deal, Southeast Asia’s largest banking takeover, may unravel.