BI gives green light to IBRA bank merger plan

The Jakarta Post, Jakarta

Bank Indonesia will clear the status of Bank Prima Express and Bank Patriot in one or two days, to pave the way for the planned merger of five banks under the supervision of the Indonesian Bank Restructuring Agency (IBRA).

Central bank Governor Sjahril Sabirin confirmed that the two banks would be allowed to join the merger scheme, along with Bank Bali, Bank Universal and Bank Artha Media.

"With this, I hope the planned merger can go smoothly," Sjahril was quoted by detik.com as saying on Wednesday.

Sjahril's statement should serve as a relief for IBRA, as the status of the two banks had been a cause for disagreement between the agency and the central bank, over whether or not the two banks were eligible to join the merger.

Previously, the central bank was reluctant to give its approval on the IBRA-proposed merger, arguing that Prima and Patriot were in a poor financial condition and not qualified for a merger.

In fact, of the five banks, only Bank Bali has the capital adequacy ratio (CAR) which managed to meet Bank Indonesia's minimum requirement of 8 percent.

This should have led to liquidations. But with the merger plan, they have been spared the ax, with IBRA chairman I Putu Gede Ary Suta insisting that closing the two banks would only be an additional burden to the government.

Meanwhile, State Minister of State Enterprises Laksamana Sukardi, whose office oversees IBRA, stressed that the agency would announce the merger plan process sometime next week.

"Hopefully, the whole process of the merger can be completed soon," Laksamana said.

The five banks are among the 11 private banks under the control of IBRA, who is responsible for leading the banks back into good financial shape, and returning them to the private sector.

The merging of local banks is seen as part of efforts to restructure the country's troubled banking industry, which has been widely blamed for the country's poor economic performance.

At the peak of the 1997 financial crisis, IBRA took over the banks after most of their loans turned sour.