20 weak banks likely to merge

JAKARTA (JP): The government's decisive move to close 16 ailing banks two weeks ago will force weak banks to merge among themselves or with larger ones, according to the Association of Private National Banks (Perbanas).

The association's chairman, Thomas Suyatno, said over the weekend that merging would be the best alternative for weak banks to escape a government closure order.

He estimated that at least 20 banks would merge in the near future to solve their financial difficulties.

"The association foresees eight new banks emerging from the merger of many private banks, most of which are publicly listed, in the first semester of next year," Thomas was quoted by Antara as saying.

But he could not specify which banks would merge.

He said the merger would take a while, as involved banks would have to adjust to each other's ideals.

Thomas said the government's decision to shut the 16 banks, as part of the International Monetary Fund's economic reform package, was an impartial move and would prompt other banks to consolidate to prevent themselves being forced into liquidation too.

"The banks will not wait for government-forced mergers, as they have witnessed that the finance minister would not hesitate to make firm and unbiased decisions," he said.

The move to close 16 banks had a positive impact, as many banks would be more careful in their management now, he said.

Several of the banks closed by the finance minister were owned by businesspeople with strong political ties to the government, such as the relatives of President Soeharto.

Thomas said he was sure the central bank, Bank Indonesia, had gone through lawful procedures before the taking the decision to close the banks.

Bank Indonesia drew up criteria or check lists on the country's 239 banks before it made the decision, and those which did not meet the criteria were closed down, he said.

"I have been in the banking industry for 31 years, and I can assure you that the government's move was legitimate," he said. (das)