CGI warns against further merger of state banks

The Consultative Group on Indonesia has warned against further mergers of large state-owned banks as it could pose risks to the country's banking sector.

The government is mulling a merger between Bank Negara Indonesia (BNI) and Bank Permata to form a mega-bank with combined assets of Rp 160 trillion, second only to Bank Mandiri -- the nation's largest lender.

However, the report said: "Some state-owned banks are already large enough to pose systemic risk to the banking system and operational weakness (in the sector) continues."

"Avoiding such mergers would best meet the government and Bank Indonesia's own objectives of creating a stronger and more competitive banking sector." -- JP