No. 32/22/BGub/Humas

Bank Indonesia today issued some new banking regulations as an implementation of Law No. 10 of 1998 on the Amendment of Law No. 7 of 1992 on Banking. The issued banking regulations covered regulations on capital, ownership, management, foreign bank branch offices, banks based on the syariah principle, working regions of the Bank of People’s Credit (BPR), bank merger, consolidation and acquisition, and bank liquidation.

"Apart from being an implementation of the Law, these banking regulations are part of the efforts taken to create a strong and efficient banking system which can stimulate and accelerate the economic recovery process," explained Bank Indonesia Director Subarjo Joyosumarto in a press conference in Jakarta, today.

In the capital area, the capital of new public banks is set at Rp 3 trillion. Meanwhile, the capital for new BPRs in the Jabotabek region is set at Rp 2 billion, Rp 1 billion in the Province capital regions, and Rp 500 million in other regions. The source of funds for capital injected cannot come from loans or from illegal activities, including from and for the purpose of money laundering. "With these capital regulations it is hoped that new banks will have reliable capabilities in providing services to the public, and also in facing competition, " added Subarjo.

In relation to the role of foreign investor, the Bank Indonesia Director explained that foreign investors are given the opportunity to hold up to 99% of national public banks shares, both for banks that have and have not gone public. This policy is taken in order to pull funds from overseas that is needed to accelerate the economic recovery and overcome the effects of the economic crisis. In line with this, the opportunity to open foreign bank branch offices (that has been closed since the beginning of the 1970s) has been opened again. However, foreign banks that are going to open branch offices have to be included in the top 200 asset owners of the world and have a minimum rating of A from an international rating institution. "So not all foreign banks are permitted to open branches in Indonesia," explained Subarjo.

Furthermore, it was explained that banking human resources are the first line of defense in facing the economic crisis. The cause of the banking crisis we have experienced also includes the weakness of banking human resources. Therefore, bank management and owners have to have high integrity, pass the fit and proper test and not be included in the list of fraudulent bankers. "Public banks whose shares are partially owned by foreign parties can even place foreign bankers as members of the board of directors and the board of commissioners with the requirement that a minimum of 1 member of the board of commissioners and directors is an Indonesian citizen," stressed Subarjo.

Meanwhile, to encourage the development of banks based on the syariah principle, it was determined that the business activity of public banks and BPRs can be performed through the formation of new banks, conversion of conventional banks into banks based on the syariah principle, and the opening of new syariah branches by conventional public banks. Conventional banks that open syariah branches are required to provide a minimum of Rp 2 billion of working capital set aside from conventional banking operations for each office in the Jabotabek region and Rp 1 billion for each office outside the Jabotabek region.

The main points of the banking regulations issued by Bank Indonesia today are attached.

Jakarta, 14 May 1999

OFFICE OF THE GOVERNOR

Deputy Head of the Office