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)