Legal merger of banks expected this year: Official<\/p>\n
Berni K. Moestafa, The Jakarta Post, Jakarta<\/p>\n
The legal merger of recapitalized banks may be completed by
\nthe end of this year, a government official said, signaling
\nefforts to avoid further liquidation by forcing weak banks to
\nmeet this year's capital adequacy ratio (CAR) target on time.<\/p>\n
Minister for State Enterprises, Laksamana Sukardi said the
\ngovernment hoped to merge recapitalized banks as quickly as
\npossible.<\/p>\n
"If it's (the merger) like Bank Mandiri, a legal merger is
\npossible this year," Laksamana told reporters after a meeting
\nwith banks Thursday night.<\/p>\n
The government said on Thursday it planned to merge banks that
\nhad remained unhealthy even after receiving recapitalization
\nbonds to lift their CAR levels.<\/p>\n
The statement came just three days after Bank Indonesia
\nshut down PT Unibank whose CAR had dropped below zero.<\/p>\n
CAR measures a bank's financial health by comparing its
\ncapital against its risked weighted assets, that includes loans.<\/p>\n
Runs on several banks marked the fallout of Unibank's
\nclosure as public confidence in private banks slipped further.<\/p>\n
Analysts said chances of more bank liquidations remained high,
\ngiven the still weak condition of the banking sector.<\/p>\n
The government did not release any of the names of the banks
\nthat it had earmarked for mergers.<\/p>\n
Laksamana said there were banks currently being supported by
\nthe Indonesian Bank Restructuring Agency (IBRA).<\/p>\n
But he added state-owned banks may be included.<\/p>\n
Under a legal merger, banks' operations remained separated
\nalthough technically they are regarded as one entity.<\/p>\n
The next step is the operational merger, which consolidates
\nthe banks' financial status and disposes of their old identities.<\/p>\n
Laksamana said he preferred to follow the merger concept of
\nBank Mandiri - the outcome of four state banks merging in 1999.<\/p>\n
The other scenario is the appointing of one strong bank to
\nbecome a "mother bank", into which smaller banks would be merged.<\/p>\n
"Rather than creating one mother bank, it's better to
\nestablish a new entity," Laksamana said.<\/p>\n
But collectively, the new entity must have a CAR level of at
\nleast eight percent to survive the liquidation threat.<\/p>\n
One bank, he added, that may be involved in a merger process
\nwas Bank Prima Express. Whereas for the publicly listed Bank
\nNiaga, he added, privatization was preferable.<\/p>\n
Laksamana also did not rule out the possibility of further
\nconsolidation of merged banks like Bank Mandiri and Bank Danamon,
\nwhich once consisted of eight different banks.<\/p>\n
"Merger is the global trend now, why don't we head the same
\ndirection," he said.<\/p>\n
Since the Sept. 11 terrorist attacks in the United States, he
\nsaid, banks' conditions had worsened enough to prompt further
\nmergers<\/p>\n
"NPLs (non-performing loans) are rising, banks' earning
\ntargets and capital are under pressure," he explained.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/legal-merger-of-banks-expected-this-year-official-1447893297",
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