Overseas Acquisition; Banks Stumble on Capital Problems  

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  • TEMPO.CO, Tangerang – The national banking industry is keen on acquiring banks in the Philippines, following the neighbor state's decision to loosen rules on foreign ownership in local banks. However, banking officials say that they are hampered by capital problems.

    Bank Mandiri (IDX: BMRI) president director Budi Gunadi Sadikin said that overseas investment will erode a bank's capital as financing to related parties. "With these conditions, it is better for our capital to be invested domestically," he said yesterday.

    Echoing a similar sentiment, Bank Central Asia (BBCA) president director John Setiaatmadja said his bank has no intention of opening overseas branches. BCA's main priority is to expand locally, admitting that capital problems are an obstacle in overseas acquisition.

    Tony Prasetiantono, an economist from Gadjah Mada University, said it is better for national banks to spend their capitals on expanding its ability to disburse credit domestically. "Just focus in Indonesia, there is a huge opportunity here," he said.

    Philippines banks, Tony said, is an unattractive investment. "The market there is not as big as what we have here, their income per capita is even lower that ours," he reasoned.

    The Philippines has allowed foreign banks to have full ownership over local banks, loosening the previous rule that restricted ownership to a maximum of 60 percent. Amando M. Tetangco Jr., Governor of Banko Sentral ng Pilipinas (BSP), said that he hopes the new rule will encourage the entry of foreign banks for long-term investment.