UPDATE 1-Indonesia cbank: More than 10 banks do not meet new health rules
(Adds details, analyst quotes)
JAKARTA, July 20 (Reuters) - More than 10 Indonesian banks do not meet the central bank's standards on financial health and corporate governance under new ownership rules, which may drive consolidation among small lenders in Southeast Asia's biggest economy.
Bank Indonesia Governor Darmin Nasution said on Friday he will support mergers and acquisitions for these lenders with local banks, and also will loosen a current "single presence" policy that means shareholders can only hold a majority stake in one bank.
Nasution did not name the banks not meeting the standards. The lenders are likely to be small ones, as analysts say the country's major banks all will meet central bank rules announced this week that require owners to have sound financial health.
The affected banks will have 18 months to meet the requirements or their owners will have to sell stakes, Nasution added.
Purwoko Sartono, an analyst at Jakarta-based Panin Sekuritas, said "We do not see this as impacting large cap banks since most of them are financially healthy, you can see their financial reports are good."
Fitch Ratings said on Thursday that the ownership rules will have no immediate rating impact on large Indonesian banks and were not expected to lead to ownership changes for such banks.
Indonesia currently has one of the region's most open banking sectors.
Eight of the biggest 11 Indonesian by market value are controlled either by foreign banks, business families, private equity firms or wealth funds.
Bank Indonesia (BI), the country's banking regulator, announced on Wednesday that financial institutions can hold up to 40 percent of local banks, while non-financial institutions can hold up to 30 percent and individuals only 20 percent, down the 99 percent ownership allowed under previous rules.
Fitch Ratings said BI's ability to require an existing shareholder to have its stake diluted should support the development of the banking sector and may spur consolidation in a fragmented sector with many small rural banks.
"The risk of failing to maintain the BI criteria may be more pronounced at small to medium-sized banks facing undue business pressure," Fitch said in a report on the rules.
The central bank's new ownership limits do not apply to state-owned banks such as top lender Bank Mandiri.
BI said listed banks that are financially strong and have tier-1 capital of more than 6 percent will be allowed to own more than 40 percent, leaving open the door for DBS Group's $7.2 billion bid to take over Indonesian lender PT Bank Danamon. (Reporting by Adriana Nina Kusuma and Andjarsari Paramaditha; Writing by Neil Chatterjee; Editing by Richard Borsuk)
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