OJK Urges Small Banks to Strengthen Fundamentals and Consider Consolidation

Comprehensive Evaluation and Strategic Collaboration

The Financial Services Authority (OJK) has formally requested banks categorized under Core Capital Bank Group I (KBMI I) to undertake a thorough evaluation of their financial condition, business structure, and long-term growth prospects. This directive, conveyed through a formal letter at the end of October 2025, emphasizes four key areas: comprehensive business evaluation, identification of consolidation opportunities, enhancement of IT infrastructure, and strict adherence to Good Corporate Governance (GCG) principles.

Key Directives from OJK

1. Comprehensive Business Evaluation: Banks are required to analyze their financial health, business structure, and medium to long-term prospects, including readiness for future regulatory changes.
2. Strategic Consolidation and Collaboration: OJK encourages KBMI I banks to explore potential mergers, acquisitions, or strategic partnerships to strengthen capital, improve efficiency, and expand business scale.
3. Digital Transformation: Banks are urged to enhance their IT infrastructure as part of ongoing digital transformation efforts, improving service quality and operational efficiency.
4. Good Corporate Governance: Strict implementation of GCG and risk management practices is emphasized during any strengthening or consolidation efforts.

Bank Responses to OJK's Directives

Several KBMI I banks have acknowledged receipt of OJK's letter and are taking steps to comply with the directives. For instance, PT Bank Sahabat Sampoerna's Director & Chief Financial Officer, Henky Suryaputra, confirmed that they have received the letter and are committed to evaluating their business fundamentals and exploring potential collaborations while maintaining prudence. Similarly, PT Bank Oke Indonesia Tbk.'s Compliance Director, Efdinal Alamsyah, noted that the OJK's guidance is part of a broader effort to strengthen the banking industry's resilience, particularly for smaller banks.

Potential Incentives for Consolidation

Dian Ediana Rae, OJK's Executive Head of Banking Supervision, mentioned that the regulator is open to providing incentives for banks that pursue consolidation. This approach aims to encourage smaller banks to strengthen their capital structure and business scale, ultimately supporting sustainable economic growth. OJK is currently adopting a persuasive approach, allowing banks to tailor their strategies according to their internal conditions while maintaining prudence.

Implications for Indonesia's Banking Sector

The OJK's initiative is a strategic response to the challenges posed by rapid digitalization and increasing cyber risks in the banking sector. By promoting consolidation and strengthening bank fundamentals, OJK aims to enhance the overall resilience and competitiveness of Indonesia's banking industry. This move is expected to have significant implications for the sector's structure and growth trajectory in the coming years.