Indonesian state lender Bank Mandiri plans to open branches in Malaysia soon while Bank Rakyat Indonesia hopes to have a presence in the near future.
Indonesia’s Financial Services Authority, known as OJK, and Bank Negara Malaysia, signed an agreement allowing three banks from each country to operate branches in the other country.
Two Malaysian banks — CIMB and Malayan Banking — have a significant presence in Indonesia, according to a report in the Nikkei Asian Review.
However, Mandiri, Indonesia’s largest lender by assets, is the only Indonesian bank with a presence in Malaysia, where it maintains a remittance office.
The bank has in the past complained about Malaysia’s strict regulations on capital requirements, among other regulations, for foreign banks wanting to enter the country.
OJK said the new deal was aimed at reducing “inequality of access” in the two markets.
“We will act fast to grab this opportunity,” Mandiri’s corporate secretary Rohan Hafas was quoted by the Nikkei Asian Review as telling reporters on Wednesday.
“We’re planning to immediately apply for a full license to operate fully in Malaysia.”
Hafas said Mandiri would meet BNM’s capital requirement of RM300 million by the end of the year — RM100 million of which is “to be deposited as soon as possible”.
Mandiri, according to the report, is not necessarily eyeing the Malaysian market.
Rather, it is targeting more fee-based income from remittance services for Indonesian migrant workers, as well as from trade activities involving Indonesian businesses.
There are nearly 800,000 registered Indonesian workers in Malaysia — mostly employed as domestic helpers or in plantations.
Migrant workers remitted USD979 million from Malaysia to Indonesia in the five months to May, according to data from Indonesia’s migrant worker placement agency.
“We will only open branch offices in several locations — where Indonesian migrant worker communities are concentrated, and perhaps in a central business district where there are a lot of trade activities involving Indonesian businesses,” Hafas said.
Another state-owned lender, Bank Rakyat Indonesia, said it would consider establishing a presence in Malaysia. This may not happen until next year, however, because the bank is currently focused on expanding its business in East Timor, director Haru Koesmahargyo said.
“BRI will make the most of this relaxing of regulation; we will not miss it,” he was quoted as saying.
OJK said the signing of the deal was part of the implementation of the Association of Southeast Asian Nations (Asean) Banking Intregration Framework.
Under the scheme, Asean member states — including Indonesia and Malaysia — have agreed to allow local banks greater access and flexibility in the region, as long as they meet the criteria to be classified as Qualified Asean Banks.