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23 August 2013
On December 26 2012 Bank Indonesia issued the Regulation on Single Ownership in Indonesian Banks (14/24/PBI/2012). The regulation was issued in an attempt to improve the competitiveness of Indonesia's banking industry in light of economic development at regional and global levels by reducing the number of Indonesian banks through consolidation. This policy is commonly known as the 'single presence policy' and was first introduced by Bank Indonesia in 2006.
Under the updated single presence policy, a party may become a controlling shareholder in one bank only. However, a party may become a controlling shareholder in two banks if:
'Controlling party' is defined as a party that controls 25% or more of the shares in the bank or, if it holds less than 25%, a party that has direct or indirect control over the bank.
Article 3 of the regulation stipulates that controlling shareholders of more than one bank are obliged to restructure their ownership by:
For the first two of these restructuring options, the act must be implemented within one year of the regulation's entry into force. For the establishment of a holding function, the act must have been carried out within six months of the regulation's entry into force.
The restructuring option of a merger or consolidation comes with the following incentives:
Controlling shareholders that opt to transfer all of their shares into a bank holding company should note that the regulation requires the holding company to be formed as an Indonesian limited liability company that is established in accordance with Indonesian law. The holding company is a separate company that does not carry out banking activities – it merely controls the activities of the financial institutions under it.
The regulation repeals and replaces Bank Indonesia Regulation 8/16/PBI/2006 on single ownership of Indonesian banks and its implementing regulation, as well as certain articles in the Bank Indonesia Regulation on Incentives in Banking Consolidations (8/17/PBI/2006, as amended).
The regulation has been in force since December 26 2012.
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