Govt to merge four banks this year<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The government announced on Tuesday that it would merge four
\nbanks including publicly listed Bank Universal, Bank Bali and
\nnon-listed Bank Prima Express and Bank Patriot in a bid to
\nrestructure the country's troubled banking industry.<\/p>\n
State Minister for State Enterprises Laksamana Sukardi said
\nthat the legal merger of the four recapitalized banks would take
\nplace later in the year, but their operational merger would need
\nmore time to prepare.<\/p>\n
Although declining to name the surviving bank, Laksamana
\ncanceled out Bank Patriot and Bank Prima Express.<\/p>\n
"What's for sure is that Bank Patriot and Prima Express will
\nonly become participants in the merger because the two banks are
\nrelatively small (compared to the other two)," he said.<\/p>\n
The four banks are part of the 11 private banks under the
\ncontrol of the Indonesian Bank Restructuring Agency (IBRA).<\/p>\n
The announcement came after the government completed a two-
\nweek-long discussion with the visiting International Monetary
\nFund mission team to draft the agenda of a new set of economic
\nreforms.<\/p>\n
The government has been trying to merge this group of banks as
\npart of efforts to consolidate the domestic banking sector, which
\nhas been criticized for progressing too slowly and hampering the
\ncountry's economic recovery.<\/p>\n
The merger process is also seen as inevitable and a cost-
\ncutting measure to avoid banking closure.<\/p>\n
The central bank has stipulated that the banks must have a
\nminimum capital adequacy ratio (CAR) of 8 percent by the end of
\nthis year or risk closure.<\/p>\n
CAR measures a bank's financial health by comparing its
\ncapital against its risked weighted assets, including loans.<\/p>\n
The government has recapitalized the banks in the wake of the
\n1997 financial crisis. But, due to deteriorating economic
\nconditions, the CAR level of the banks has started to weaken
\nagain.<\/p>\n
According to the November issue of Infobank monthly magazine,
\nBank Bali, with total assets of around Rp 12.38 trillion, had a
\nCAR level of 11.9 percent as of June 2001.<\/p>\n
Bank Universal, with total assets of Rp 12.74 trillion, had a
\nCAR level of 4.1 percent, while Bank Prima Express, with total
\nassets of Rp 1.61 trillion, had a CAR level of 6.5 percent.<\/p>\n
Key financial indicators of Bank Patriot were not available.<\/p>\n
Looking at previous merger deals, the new banking merger would
\nalso have to involve massive layoffs.<\/p>\n
Bank Universal, for instance, has some 2,500 employees.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/govt-to-merge-four-banks-this-year-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }