Indonesia's central bank Wednesday announced new regulations limiting bank ownership to 40 percent, but it was unclear whether the cap would affect a $7.3 billion acquisition bid for Bank Danamon.

DBS Group of Singapore announced plans to buy Danamon in April, although the deal was put on hold after Bank Indonesia (BI) -- the nation's central bank -- declined approval until it had issued new regulations on foreign ownership.

Unveiling the new rules Wednesday, BI said exceptions would be allowed, leaving the door open for the deal to go ahead if specific, as yet unspecified, criteria were met.

The new rules limit ownership of new acquisitions by financial institutions to 40 percent, non-financial institutions to 30 percent and families or individuals to 20 percent, said Mulya Effendi Siregar, an executive director at BI.

"The ownership of commercial bank shares will apply to foreign and domestic banks to improve the health of banks," he said.

BI said that financial institutions could own more than 40 percent of a domestic commercial bank, but only under specific criteria and with its approval.

"Financial institutions can have more than 40 percent stakes in a bank as long as there is an agreement from the (BI) banking supervisor," Siregar said.

His comment suggested that the Danamon deal could still be approved.

A green light on the closely-watched deal, which highlights the eagerness of global institutions to expand in Indonesia, would give foreign firms more confidence to invest in an economy that posted 6.5 percent growth last year.

"We are studying the regulations as the details have just been published," a Danamon spokesman said.

BI said the new rules came into effect on July 13, and that state-owned banks and banks undergoing recovery were exempt.

They replace regulations that allowed local and foreign investors to own up to 99 percent of Indonesian banks.

Fauzi Ichsan, a senior economist at the Standard Chartered Bank in Jakarta, said the new regulations were a step forward.

"It's a step in the right direction, but implementation is another matter," he said.

"It is a good move if Bank Indonesia can be objective, stern and willing to impose forced divestment of stakes in banks considered to be lacking in good corporate governance."

Indonesia's banking sector has been a magnet for foreign firms willing to accept an uncertain investment environment in return for booming growth.

channelnewsasia.com