KB wins approval under Indonesia’s stricter holding rules

Indonesia’s tightening oversight of financial conglomerates is prompting major Korean financial groups to reorganize their local ownership structures.

KB Kookmin Bank is the latest to secure approval for a holding-company transition.

The change is expected to have little immediate impact on KB’s Indonesian operations. Industry officials view it primarily as a compliance measure as Jakarta imposes more centralized supervision and additional requirements on financial groups operating across multiple sectors.

Indonesia’s Financial Services Authority (OJK) approved Kookmin Bank’s restructuring plan on Aug. 5, KB Financial Group confirmed Tuesday. Under the plan, KB Data Systems Indonesia will be converted into a local financial holding company and take over Kookmin Bank’s 66.88 percent stake in KB Bank Indonesia.

The ownership structure and placement of KB’s other Indonesian affiliates under the new entity will be determined through further consultations with OJK. The restructuring must be completed within one year of approval.

KB first submitted its proposal in June last year but was asked to revise it. The bank filed an amended plan in March and received approval five months later.

The requirement stems from OJK regulations introduced in 2024 to strengthen group-level oversight of financial conglomerates.

The rules apply to groups whose Indonesian financial businesses have combined assets of at least 100 trillion rupiah ($5.6 billion) and include at least two institutions operating in different sectors.

Groups with assets of between 20 trillion rupiah and 100 trillion rupiah are also covered if they operate at least three institutions across three financial sectors.

For Korean companies, the transition offers no clear near-term business advantage. Instead, it places their banking, insurance, securities and other financial operations under more consolidated regulatory oversight.

“To operate financial businesses in another country, companies have to comply with the rules set by that country,” an industry official said. “The restructuring itself is unlikely to have a significant effect on business for now.”

Industry officials said Korean financial groups are proceeding cautiously as Indonesian regulatory requirements become more detailed and approval processes remain time-consuming.

KB’s application itself required a revision and a second review. Korean financial companies have also faced lengthy regulatory procedures in Indonesia in the past, adding time and costs to expansion and restructuring plans.

“The OJK can be quite demanding, and different departments within the regulator can sometimes have different views on the same issue,” another industry official said.

The approval comes as KB works to turn around KB Bank Indonesia, which has recorded losses since Kookmin Bank took control of Bank Bukopin in 2020.

The unit’s net loss narrowed to 4.1 billion won ($2.9 million) in the first half from 80.9 billion won a year earlier, while operating revenue rose to 536.4 billion won from 284.7 billion won.

“We will continue to work closely with the Indonesian authorities as we move forward with the holding-company transition,” a KB Financial official said.

If completed next year, the new structure will satisfy Indonesia’s regulatory requirement without materially changing KB’s immediate business strategy in the country.

Other Korean financial groups are making similar adjustments.

Shinhan Financial Group has received OJK approval for its holding-company transition and is proceeding with follow-up procedures. Its Indonesian operations span banking through Bank Shinhan Indonesia, multifinance through Shinhan Indo Finance and securities through Shinhan Sekuritas Indonesia.

Hanwha Life Insurance is preparing for a similar move after expanding beyond life insurance. Hanwha’s Indonesian financial businesses now cover life and general insurance, banking and securities.