Maybank hopes Indonesia won’t change policy on foreign shareholding in banks

KUALA LUMPUR: Malayan Banking Bhd (Maybank) is optimistic that the upcoming Indonesian ruling on bank shareholding will not be detrimental to foreign investors.

Based on media reports so far, the bank had understood two key points. The first was the possibility of Indonesia introducing foreign ownership restriction and compelling banks to reduce their foreign shareholding to below 50%.

The second was that such a move could pertain to limiting the extent of control by any single person or any single shareholder.

“The second message is part of efforts to improve corporate governance as there were issues at the smaller banks arising from actions of certain shareholders. On our part, we are anxiously waiting for the exact policy to be announced,” said Maybank president and CEO Datuk Seri Wahid Omar.
Wahid: ‘We hope it will not change the policy now that the situation is much improved.’(Pic shows the interview)

“We hope Indonesia would not change its policy on foreign shareholdings now. It has been liberal in the policy on foreign shareholdings in the past, in particular after the 1997 Asian financial crisis, when many banks were short of capital and had to be restructured. These banks were taken over by the Indonesian Bank Restructuring Agency and include banks like BII (Maybank subsidiary Bank Intemasional Indonesia).

“At that time, Indonesia welcomed foreigners and we hope it will not change the policy now that the situation is much improved.

“Furthermore, foreign banks only command less than 30% of the market compared with the more than 70% dominated by Indonesian banks,” Wahid told StarBiz in an interview yesterday.

He expects some sort of flexibility to be given to foreign investors in Indonesia.

“I don't think any policy introduced will be detrimental to foreign investors. For example, the ruling on the tender offer previously that we have to pare down our stake in BII from 97.5% to 80%.

“There is still flexibility given that we will not be compelled to sell down and incur losses if the price of BII shares was lower than what Maybank had paid for previously.

“We have to refloat about 20% of our stake in BII to reduce our shareholding to 80% and update the relevant authorities there every six months regarding this matter. We have until December to do so,” said Wahid.

To date Maybank has sold less than 0.5% of BII shares in the open market over the past one year. It has more than 17% to sell.

In view of the current economic uncertainties, Maybank has taken measures to increase its medium-term funding for US dollars to prepare for market volatilities ahead, Wahid said.

“We are cautious about both the capital and money markets, in view of the uncertainties in the US and Europe,” he added. “We monitor our position very closely at interbank and foreign currency holding.”

“The way we operate this medium-term funding is to make sure that our assets and liabilities are matched. For example, when lending in US dollars, we make sure that we have enough funding in US dollars to fund it,” he explained.

The traditional approach will be to mobilise more retail deposits to fund loans growth.

“Apart from Indonesia and Singapore, most of our funding in US dollars would be wholesale in nature and there is a need to ensure that we are not overdependent on short-term wholesale funding.

“We target a minimum of 30% of US dollar funding in medium-term funds, which can be undertaken via the issue of senior debt, short term debt or direct loans from financial institutions,” he said.

“The money market has been very active. Where there is volatility, there is also opportunity especially in terms of spreads. This is something that our people look at very closely.

“At the moment, we have decided to keep a minimum holding in US treasuries, due to the uncertainties. In terms of debt instruments, we prefer to hold sovereign debt instruments of the countries we operate in,” Wahid said.

“For example, in Malaysia, it will be the Malaysian Government Securities; in Singapore it will be the Singapore Government Securities; and in Indonesia, it will be the Indonesian Government Securities.”