Bankers question feasibility of BI's swift consolidation<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Some bankers questioned on Wednesday whether Bank Indonesia's
\nplan to push for swift consolidation of the country's banking
\nsector, by encouraging more mergers in the near future, was
\napplicable.<\/p>\n
Bank Mandiri director for corporate secretary Nimrod Sitorus,
\nwhose bank is the largest lender by assets, said there were
\nseveral obstacles preventing the consolidation of banks.<\/p>\n
First, there was no urgency for most banks to merge with or
\nacquire another banks, because at present the banking industry
\nwas still profitable.<\/p>\n
Banks here also have little experience in carrying out
\nvoluntary mergers as most, if not all, mergers in the country
\nwere classified as forced mergers.<\/p>\n
\"Mergers in the past happened because of the regulator's
\ndemand,\" he said, adding that mergers required a costly and
\ncomplex process, such as restructuring assets, reorganizing the
\ncompany and unifying the information and technology applied by
\nthe resulting bank.<\/p>\n
\"In the case of Bank Mandiri, we spent a lot of time, among
\nother things, to lay off more than 10,000 employees and to
\nintegrate the information and technology systems,\" he said.<\/p>\n
Mandiri is a merger of four state banks -- Bank Exim, Bank
\nBumi Daya, Bapindo and Bank Dagang Nasional.<\/p>\n
Mergers and acquisitions are encouraged by the central bank in
\nits Indonesian Banking Architecture (API), introduced last year,
\naiming mostly to reduce the number of banks here, from the
\ncurrent 132 banks to 35 to 58 by 2010, with capital ranging from
\nRp 100 billion (about US$10,200) to Rp 50 trillion.<\/p>\n
Echoing Nimrod was Pardy Kendy, Bank Buana president director,
\nwho said that while agreeing that the API would eventually
\nproduce a sound banking industry, he doubted whether voluntary
\nmergers would be attractive to small- and medium-sized banks.<\/p>\n
\"Many small- and medium-scale banks here are owned by a family
\nor an individual, who would be reluctant to sell their banks
\nbecause they perform well,\" he said, pointing to the fact that
\nsuch banks had outperformed the bigger banks in the past five
\nyears.<\/p>\n
\"Medium banks, such as Bank Buana, have performed well, with
\nprofitability supported by their efficiency rather than their
\nmarket share,\" he said.<\/p>\n
\"The only way for us is to expand our business and become big-
\nscale banks. But the problem is, not so many investors are
\ninterested in medium-scale banks,\" said Pardi.<\/p>\n
Institute for the Development of Economics and Finance (Indef)
\neconomist Iman Sugema added that voluntary mergers were unlikely
\nto happen because the gap in assets value between big-scale banks
\nand medium banks were too wide.<\/p>\n
\"Even among the top 20 banks, the gap is too wide. Bank
\nMandiri, the number one on the list, has assets 20 times more
\nthan those of BPD Jabar, which is 20th on the list,\" he said.<\/p>\n
\"How could you expect voluntary mergers to happen? Unless it
\nis among banks of the same size,\" he said. (006)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bankers-question-feasibility-of-bis-swift-consolidation-1447893297",
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