Indonesia Business part of My Business Blogging Channel

Bank Indonesia (BI) is requiring banks to comply with the minimum capitalization requirement by seeking fresh capital or merging with other banks as part of its effort to consolidate the banking sector under the Indonesian Banking Architecture (API) scheme.
Under the scheme, the central bank is aiming at reducing the number of commercial banks from 130 at present to 70 by 2010, by requiring all banks to have the minimum capitalizations of Rp. 80 billion by the end of this year, and Rp. 100 billion by the beginning of 2010.
Chairman of National Banks Association (Perbanas), Sigit Pramono said that that regulation must be extend at least six months, most investors nevertheless regarded it as being too tight. If there is a possibility of extending the deadline, maybe twelve banks are struggling to meet the central bank’s capital adequacy deadline will be find out the solution. 
These banks, whose capitalizations stood at only around Rp 50 billion as of March, had yet to secure any commitments for fresh capital or to agree to merge with other banks, according to the study, which was conducted by InfoBank magazine.
The study also found that a total of 26 banks have capitalizations of less than Rp 80 billion, but the other 14 are currently in the process of merging with other financial institutions. Under the API scheme, by 2010 the banking sector will consist of three international banks with capitalizations of more than Rp 50 trillion and five national banks with capitalizations of between Rp 10 trillion and Rp 50 trillion.

Topic: Business, Finance, Government, News