March 24, 2020 / 9:43 AM / 11 days ago

Indonesia raises core capital requirement for banks

JAKARTA, March 24 (Reuters) - Indonesia’s financial services authority (OJK) has issued a regulation that increases the core capital requirement for banks to 3 trillion rupiah ($182.09 million) by 2022, according to a statement on Tuesday.

In January, an OJK official described the requirement as part of a long-term plan to streamline hundreds of Indonesia’s small commercial lenders and upscale their businesses with capital injection, mergers, or acquisitions.

Previously, the core capital requirement was 100 billion rupiah which has been deemed “irrelevant” by the regulator.

The move is not linked to the Indonesian government’s efforts to battle the economic effects of the coronavirus epidemic. Indonesia is discussing raising the limit on the country’s fiscal deficit as a proportion of GDP above an existing 3% legal limit to shield the economy, its deputy finance minister said on Tuesday.

The new OJK regulation also increases the amount of capital allocated by a foreign bank to their Indonesian branches, known as Capital Equivalency Maintained Assets (CEMA), to 3 trillion rupiah.

Banks are given time to increase their core capital in stages, starting at 1 trillion rupiah this year to the required amount in 2022. Rural development banks have longer time, up to December 2024. ($1 = 16,475 rupiah) (Reporting by Tabita Diela; Editing by Raju Gopalakrishnan)

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