AN OFFICIAL at DBS Bank's Indonesian unit said yesterday that he expects the bank to have its primary dealing licence reinstated after talks with the authorities. Last week, DBS Indonesia lost its primary dealing licence, which permits a bank to transact directly with Indonesia's central bank, for instance.
Mr Scott Armstrong, president director of DBS Indonesia, said the loss of the licence would not affect operations or expansion plans. 'While the impact on earnings is not material, we regard the loss as a matter of utmost concern.'
DBS Indonesia said it had been taking action to comply with the requirements of the Indonesian authorities.
Mr Armstrong added: 'We'll undertake rectification as necessary and continue our discussions with the Finance Ministry...We believe that we'll be reinstated as a primary dealer.'
DBS Indonesia said the move 'has no impact on banking operations, which remain strong and in expansion mode'.
Mr Armstrong added that the revocation does not reflect any underlying weakness in its banking operations. DBS Indonesia's banking licence remains intact, he said.
Primary dealers are banks or securities houses which can carry out transactions directly with the central bank and are usually responsible for the direct distribution of new government debt.
The move to curb DBS Indonesia's operations was disclosed on the Indonesian Finance Ministry's website last Friday. DBS Indonesia, which received its primary dealership licence earlier this year, was one of 15 banks and four securities houses holding such licences.
Last Wednesday, the ministry withdrew DBS Indonesia's primary dealership, citing the bank's inability to fulfil licensing requirements in spite of three reminder letters in the past year.
Responsibilities of a primary dealer include submitting a bidding offer on each government bond auction, and participating in the primary auctions of state debt securities by the Finance Ministry, amounting to at least 2 per cent of the total indicative target sales on a three-month rolling average basis.
A DBS spokesman told The Straits Times yesterday: 'We participated in the bond issue on Aug 28, when we picked up about 6 per cent. However, our licence was withdrawn with effect from Aug 29 as we were not able to meet the three-month rolling average of the 2 per cent quota requirement.'
DBS Indonesia said it had initiated the necessary actions to meet its obligations as a primary dealer, but its licence was revoked before these measures were fully in place.
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