Regulations Force Bank Central Asia to Close Office in Malaysia

By webadmin on 09:18 pm Apr 23, 2012
Category Archive

Grace Dwitiya Amianti

Bank Central Asia, Indonesia’s third-largest lender by asset, plans to close its office in Malaysia due to difficulties in growing its business, the company said in a statement on Monday.

BCA Remittance Sdn Bhd, BCA’s unit in Malaysia that handles remittance services will stop taking new orders from customers next Monday. The office will remain open May 2-11, however, for money-sending orders that were placed prior to April 30.

The bank’s president director, Jahja Setiaatmadja, said the move had to be done because it was going to take too long to reach the break-even point from the time the investments were received.

“There are four outlets,” he explained. “I have calculated the profitability. We need to operate at least 15 outlets, with eight years of work, to hit the break-even point for all the investment costs. That’s too long.”

Jahja said it is better that BCA form an alliance with local money changers to continue its remittance delivery service.

He also admitted that regulations put in place by the Malaysian authorities made things tough for foreign lenders, including those from Indonesia, and caused investment costs to soar. He said it is costly to incorporate a subsidiary and operate one as a foreign investor in Malaysia.

“The rules there are admittedly quite tough,” he said.

Some of the regulations in Malaysia include a requirement to put up capital of 300 million Malaysian ringgit ($98 million) to establish a local subsidiary.

A lender owned by a foreign investor can only open eight outlets in urban and semi-urban locations.

BCA was also required to establish its own ATM network, meaning it could not cooperate with a local electronic payment provider.

Indonesian lenders lobbied to Bank Indonesia, the central bank, to push for reciprocal principles for countries in which banks or investors operate or own banks in Indonesia.

Lenders from Indonesia, which has Southeast Asia’s biggest economy, feel that they are not given equal treatment as those from neighboring countries who want to operate in Indonesia.

Bank Mandiri, the biggest lender in Indonesia, said on April 10 the nation’s regulators need to consider the reciprocal principle in responding to the acquisition of rival Bank Danamon Indonesia by Singapore’s DBS Group.

Investor Daily, Jakarta Globe