Indonesia bank Chief denies suspending bank purchases

JAKARTA: Bank Indonesia Governor Darmin Nasution on Friday denied reports that permit investors to buy local banks had been suspended pending new rules on ownership caps.

"Acquisition processes can still continue," Nasution was quoted as saying by Dow Jones Newswires.

Bank Indonesia spokesman Difi Johansyah had earlier said the issuance of permits to purchase banks had been suspended until a decision was made about new investment rules.

"Hopefully the regulation can be issued later this year," he said.

The proposed regulation is designed to improve prudential practices in commercial banks by preventing a single investor dominating management. Single investors currently can own up to 99 percent of local banks.

The restriction would apply to local as well as foreign investors but analysts say it could especially hit offshore interest in the local banking market and force some foreign players to sell their majority stakes.

Interest in the local banking sector has grown thanks to Indonesia's booming economy, with growth expected to reach about seven percent this year, and the related expansion of its domestic consumer market.

"This type of regulatory move on the part of our government is coming at a really bad moment considering Indonesia is getting so much attention from investors," Indonesian Chamber of Commerce chief Suryo Sulisto told the Financial Times last week.

"I am afraid that it will throw the market for a loop and deter future foreign investment."

Copyright AFP (Agence France-Presse), 2010