Indonesia central bank bans M&As in domestic lenders

The country’s banking industry has been thrown into confusion since Bank Indonesia mulls new limits on bank ownership.

Indonesia's central bank temporarily barred takeovers in the banking sector, citing upcoming ownership rules, sowing more uncertainty about the regulatory environment in Southeast Asia's biggest economy.

Indonesia's expected imposition of bank ownership limits, including those on foreign investors, have already scuttled some cross-border deals. If the limits are imposed retroactively, as some expect, then several offshore investors and banks will have to cut their stakes in local lenders.

"We temporarily will not permit foreign banks to acquire domestic banks until the bank ownership regulation is issued," said Bank Indonesia spokesman Difi A. Johansyah.

The central bank is still drafting the policy and has not decided when it will be issued, he added. The bank has said earlier there was a possibility it could be issued this year, with a lengthy transition period likely.

In the meantime, even local banks won't be given permission for deals, officials said. Most deals in the Indonesian banking sector are initiated by foreigners.

The banking industry in Indonesia has been thrown into confusion ever since central bank governor Darmin Nasution said last month new limits on bank ownership were being studied. There is expectation in the industry that foreign ownership will be limited to 50 percent in banks.

View the full story in Reuters.