BI TO REDUCE CAR FOR ESTABLISHING SHARIAH COMMERCIAL BANKS

Jakarta, Feb 8 (ANTARA) - Bank Indonesia plans to reduce the capital adequacy ratio (CAR) for conventional banks wishing to set up a shariah commercial bank through a spin-off from Rp1 trillion to Rp500 billion as of March, the director of the central bank's directorate, Ramzi A Zuhdi, said here on Sunday.
"According to the current Bank Indonesia Regulation (PBI) the CAR for establishing a shariah commercial bank is Rp1 trillion but later we will reduce it to Rp500 billion for shariah commercial banks established through a spin-off," he said.
He said the regulation was now being finalized. "It is expected to be completed next month at the latest," he said.
He said it was hoped the new regulation would be able to promote growth of shariah bank assets currently standing at 2.1 percent of those of conventional banks.
Shariah economic observer Gunawan Yasni hailed the central bank's decision. "In order to promote the growth of shariah banks an incentive is indeed needed," he said.
He said besides reducing the capital requirement Bank Indonesia could also give an incentive. "In Malaysia an incentive in the form of a tax exemption for several years will be given to those wishing to set up shariah banks or insurance companies. In Indonesia it will be difficult to do it because it requires discussions by the government and the House of Representatives. However BI could give an incentive by reducing the risk weighted assets (ATMR) for shariah banks," he said referring among others to an ATMR for products such as shariah housing credits.
He said a shariah housing credit was repaid in fixed instalments without interest making its risk more manageable than that of the conventional bank product.
"So, the ATMR in shariah banks must be reduced for example 25 percent as the ATMR for conventional banks whose risk is up and down is valued at 50 percent," he said.
He said if incentives like them could be implemented conventional banks that had shariah units could be able to promote their shariah financing. "And this could spur spin-offs after the reduction of the capital requirement," he said.
The president director of BNI, Gatot M Suwondo, meanwhile said his bank was expecting the new BI regulation for the establishment of a shariah bank. He said his bank would immediately spin off its shariah unit as soon as the regulation was issued.
He said BNI was currently processing the establishment of a general shariah bank in cooperation with the Islamic Corporation for the Development of the Private Sector (ICD).
The two had signed a memorandum of understanding for it. Gatot said the spin-off was part of the bank's plan for the establishment of shariah banks in cooperation with the ICD.