Indonesia suspends bank purchases

JAKARTA: Indonesia on Friday suspended the issuance of permits to purchase banks as it mulls new ownership laws that would limit how much single investors can buy in local commercial lenders.

"Hopefully the regulation can be issued later this year," central Bank Indonesia spokesman Difi Johansyah said, according to Dow Jones Newswires.

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