Indonesian Banks Could Turn to Consolidation in Response to New Banking Regulations and COVID-19

Industry experts from domestic law firm Assegaf Hamzah and Partners (AHP), have analysed that most banks in Indonesia are not equipped to deal with the economic disruptions caused by the on-going pandemic. According to Ibrahim Sjarief Assegaf, partner at AHP, most banks in Indonesia are burdened with thin levels of capitalisation and minimum sources of deposits, making them more susceptible to liquidity and solvency issues.

According to AHP, the Indonesian banking sector was facing challenges even pre-COVID-19, following the easing of ownership regulations in domestic banks. In January 2020, the Financial Services Authority (OJK) passed an announcement allowing a single investor to hold controlling interests in more than...