Bankers welcome govt's plan to merge state-owned banks

Bankers welcome govt's plan to merge state-owned banks

JAKARTA (JP): Bankers welcomed yesterday the government's plan
to merge the seven state banks, and asked it to merge private
banks too, to improve their competitiveness.

Abdullah Ali, president of Bank Central Asia -- the country's
largest privately owned bank --, and Bangun S. Kusmulyono,
president of Bank Nusa International, agreed that the
government's plan would create a healthy banking industry.

They said mergers between state and private banks were needed
to strengthen their capital.

"If we don't do it now, our financial institutions will weaken
and be overrun by foreign banks when financial liberalization
comes," Abdullah said.

Abdullah said mergers between private banks were far more
important than between state banks because many local private
banks were not running well.

"Many private banks are in an unhealthy condition because they
extend credits carelessly and, even worse, shareholders are
reluctant to improve their condition," Abdullah Ali said in
Puncak, West Java.

The finance minister confirmed Thursday that the government
was studying the possibility of merging the seven state banks
into a smaller number.

The minister said that some of the state banks were good and
some not so good, as with private banks. Because of this the
government felt it necessary to pool their resources.

The seven state banks are Bank Rakyat Indonesia (BRI),
publicly listed Bank Negara Indonesia 1946 (BNI), Bank Dagang
Negara (BDN), Bank Tabungan Negara (BTN), Bank Expor Impor
Indonesia (Bank Exim), Bank Bumi Daya (BBD) and Bank Pembangunan
Indonesia (Bapindo).

Based on InfoBank magazine's bank rating assessment, BBD is a
poorly performing bank and Bapindo an unhealthy bank. Bapindo has
not published financial reports since June 1994.

Unhealthy private banks include Bank Pacific, Bank Yama, Bank
Uppindo, Bank Perniagaan, Bank Dana Asia, Bank Industri and Bank
Pinaesaan.

Unhealthy small banks include Bank Umum Majapahit Jaya, Bank
Arta Prima, Agrobank, Bank Dewa Rutji, Bank Intan, Bank Anrico,
BPD (provincial development bank) Kalimantan Barat, BPD Maluku,
BPD Lampung and Bank Asta.

Abdullah said mergers should be followed by efforts to improve
banks' soundness.

He said some healthy banks had run into trouble when their
managements lost autonomy and were forced to extend credit to
certain parties without collateral.

"Please don't disrupt the management with this and that, and
don't force them to conduct banking practices that they consider
unhealthy. If these things continue, mergers will be useless,"
Abdullah said.

He suggested that Bank Indonesia, the central bank, instruct
private banks' shareholders to pursue mergers. If they refuse,
the central bank should force them, he said.

"It does not need a regulation, just summon them, as the
central bank did in the early 1970s. That proved to be effective
in reducing the country's banks by 50 percent," Abdullah said.

Early in the 1970s, Abdullah was head of banking supervision
and development at Bank Indonesia.

Mansjurdin Nurdin, a Bank Indonesia director, was reported by
Antara as saying yesterday in Semarang, Central Java, that the
number of commercial banks had decreased to 237 banks from 239
banks as a result of mergers.

"Mergers are a way of consolidating the banking industry,"
Mansjurdin said.

But he did not say which banks had merged. (jsk/rid)