Jakarta, Indonesia Sentinel — In recent years, Indonesia has witnessed a significant retreat of foreign banks from its financial sector. The latest development occurred in September 2024, when PT Bank Commonwealth (PTBC), an Australian financial institution, merged with PT Bank OCBC NISP Tbk. (NISP). This move, approved by Indonesia’s Financial Services Authority (OJK), marked the cessation of PTBC’s operations in the country. Effective September 1, 2024, PTBC customers transitioned to OCBC Indonesia, signaling the end of yet another foreign bank’s journey in Indonesia.
PTBC’s exit adds to a growing list of Western banks leaving Indonesia, reflecting broader challenges and strategic realignments within the global banking industry. Here’s a closer look at notable foreign banks that have departed and the reasons behind their decisions.
Citi Indonesia: Shifting Focus to Corporate Banking
In November 2023, Citibank, N.A. Indonesia concluded its consumer banking operations, transferring assets and liabilities to Singapore-based PT Bank UOB Indonesia. The transition was part of Citigroup’s global strategy to streamline its consumer banking operations, retaining only key markets such as Hong Kong, Singapore, and the UK.
Although Citi Indonesia exited the retail sector, it continues to operate in the corporate banking space, maintaining a presence in Indonesia’s financial market.
Rabobank Indonesia: Losses Force an Exit
Dutch-based Rabobank Internasional Indonesia closed its operations in April 2019 after nearly three decades in Indonesia. The decision was driven by sustained financial losses, with the bank reporting a deficit of IDR 9.78 billion as of March 2019.
Rabobank’s withdrawal aligned with its global strategy to focus on the food and agriculture sectors. Its assets were later acquired by PT Bank Central Asia Tbk. (BCA), signaling a shift in ownership but not necessarily market presence.
RBS Indonesia: A Strategic Pullback
The Royal Bank of Scotland N.V. (RBS) ceased operations in Indonesia in 2018 as part of a broader decision to exit 24 global markets. The closure reflected RBS’s strategy to focus on core markets, with its Indonesian operations becoming a casualty of this consolidation effort.
ANZ Indonesia: A Loss-Making Sale
Australian financial institution ANZ exited the Indonesian retail banking sector in 2018, selling its business to PT Bank DBS Indonesia. This move resulted in a significant financial loss of USD 265 million. The sale encompassed ANZ’s wealth management and retail banking services, marking a retreat from several Asian markets, including China, Hong Kong, and Singapore.
Barclays and Credit Agricole: Early Departures
Barclays, the British banking giant, entered Indonesia in 2008 by acquiring Bank Akita. However, its operations were short-lived, as the bank exited Indonesia during a global reorganization effort.
Similarly, French bank Credit Agricole Indosuez withdrew in 2003, citing declining financial performance and unsuccessful restructuring efforts.
Underlying Causes of Foreign Bank Exits
Several factors have driven foreign banks out of Indonesia:
- Regulatory Challenges: Indonesia’s stringent banking regulations, including requirements for local ownership and high capital reserves, pose significant hurdles for foreign institutions.
- Competition: Local banks, backed by strong government support, dominate the market, leaving little room for international players.
- Strategic Realignments: Many banks, including Citigroup and ANZ, are refocusing on core markets, leading to the closure of less profitable operations in emerging markets like Indonesia.
- Economic Pressures: Financial losses, as experienced by Rabobank and ANZ, highlight the difficulties of operating in Indonesia’s banking sector.
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The Future of Foreign Banking in Indonesia
Despite these challenges, not all foreign banks are retreating. Institutions like UOB and DBS have expanded their presence through strategic acquisitions, leveraging opportunities created by exiting competitors.
However, the broader trend suggests a recalibration of foreign involvement in Indonesia’s financial sector. For foreign banks, the choice to remain or leave hinges on their ability to adapt to local market dynamics while aligning with global strategic goals.
As Indonesia continues to develop its economy, the role of foreign banks may evolve, potentially shifting toward niche services or partnerships with local institutions. The exits of major players like Citigroup, ANZ, and PTBC underscore the complexities of balancing global strategies with local realities.
(Becky)
