Bank mergers easier on paper than done: Experts<\/p>\n
Berni K. Moestafa, The Jakarta Post, Jakarta<\/p>\n
The government's plan to push ahead with the consolidation of
\nthe banking industry was long overdue, an expert said, but warned
\nits implementation must follow tight scrutiny to avoid ending up
\nwith fewer yet bigger sick banks.<\/p>\n
Senior banker I Nyoman Moena said the government should be
\ncareful in selecting the banks it plans to merge.<\/p>\n
\"Bigger doesn't mean better,\" Moena said over the weekend.<\/p>\n
He was commenting on the government's announcement last week
\nto merge banks under the Indonesian Bank Restructuring Agency
\n(IBRA).<\/p>\n
Among IBRA's tasks is to restructure banks that were
\nsurrendered to the agency due to adverse financial conditions.<\/p>\n
\"If by merging the government only hopes to reduce the number
\nof banks, that's fine. But I'd say it's not worth the cost of
\nmerging them,\" Moena went on.<\/p>\n
According to him, a merger is almost certain to ensue mass
\nlayoffs. And based on the experience of merging the four state
\nbanks that today make up Bank Mandiri, additional costs may arise
\nto recapitalize them, he added.<\/p>\n
The government has injected recapitalization bonds into banks
\nin exchange for their bad loans, which IBRA has taken over.<\/p>\n
This has amounted to Rp 430 trillion (US$40.48 billion) in
\nrecapitalization bonds, with interest payments of some Rp 61
\ntrillion to be made this year.<\/p>\n
Criticism has begun to increase on the effectiveness of the
\nexpensive bailout, as many of the recapitalized banks remain
\nsick.<\/p>\n
Analysts said most banks now relied on interest payments from
\ngovernment bonds instead of investing in new loans.<\/p>\n
This mainly rests on the reluctance of banks to channel new
\nloans over fears they could turn sour again amid a still sluggish
\neconomy.<\/p>\n
Separately, economist Arif Arryman of the Advisory Group in
\nEconomics, Industry and Trade (Econit) likened the merger of
\nbanks to a marriage that needed much consideration.<\/p>\n
\"They must fit together. It's not easy to find banks that
\nshare the same core business, provide synergy and whose employees
\ncan work together,\" Arif said.<\/p>\n
But Arif added that consolidating the national banking sector
\nwas inevitable.<\/p>\n
\"We have too many banks given the size and dimension of our
\neconomy. Not only are they many, but they're also sick, lacking
\nin capital and assets,\" Arif said.<\/p>\n
In his estimation, the government could come up with a legal
\nframework or a blueprint of the future national banking sector by
\nthe end of the year.<\/p>\n
Economist Dradjad H. Wibowo said the merging process should
\nnot be forced on banks at too short a notice.<\/p>\n
He said the lack of preparations during the merger process
\ncould turn into costly mistakes.<\/p>\n
Dradjad said finalizing one or two mergers next year would
\nsend a strong signal of the government's commitment to reform the
\nbanking sector.<\/p>\n
Data from Bank Indonesia shows that 149 banks were operating
\nin Indonesia as of June 2001. This amount should come down to
\naround 20 banks, comprising strong banks and those able to reach
\nout to the regions, Dradjad added.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bank-mergers-easier-on-paper-than-done-experts-1447893297",
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