Indonesia re-appoints HSBC as primary bond dealer after local integration

(Adds comment from fin ministry official, background)

By Eveline Danubrata and Hidayat Setiaji

JAKARTA, April 26 (Reuters) - Indonesia's finance ministry said on Wednesday it had re-appointed HSBC as a primary dealer of government bonds following the bank's move to be locally incorporated.

The appointment of PT Bank HSBC Indonesia was effective on April 17, the ministry said in an emailed statement.

Last week, HSBC's branch in Indonesia was integrated with a local entity previously known as PT Bank Ekonomi Raharja, in a move that the bank said will expand its offerings and network in the country. (http://bit.ly/2oIVyWC)

The new entity still fulfills the condition of being a primary bond dealer after the integration, Loto Srinaita Ginting, director of government bonds at the finance ministry, told Reuters by phone.

A primary dealer is a bank or a securities firm appointed by the finance minister that can buy government bonds in auctions and resell them in the secondary market. Indonesia had 19 such dealers as of Nov. 25.

There has been a growing push in Indonesia for foreign banks to be locally incorporated. Some parliamentarians have said the move is necessary to ring-fence capital in Indonesia, particularly if there is a financial crisis.

Indonesia dropped JPMorgan (LSE: JPIU.L - news) as a primary bond dealer after the U.S. bank in November published a research report on the country that was considered negative by the government.

The finance ministry in January announced new rules requiring all primary bond dealers to "safeguard" their partnership with the government and avoid conflicts of interest. (Reporting by Eveline Danubrata and Hidayat Setiaji; editing by Jason Neely)