Govt to merge four state-owned banks

Govt to merge four state-owned banks

JAKARTA (JP): The government will merge four of the seven
state-owned banks into a single bank as part of reform measures
in the banking industry, says Minister of Finance Mar'ie
Muhammad.

Mar'ie said Wednesday that the merger of Bank Pembangunan
Indonesia (Bapindo), Bank Bumi Daya (BBD), Bank Dagang Negara
(BDN) and Bank Ekspor Impor Indonesia (Bank Exim) would create a
healthier bank, with combined assets of about Rp 98 trillion
(about US$18.8 billion)

The minister said Bank Tabungan Negara (BTN), which focus its
operation on providing home loans, would become a subsidiary of
Bank Negara Indonesia (BNI), the only state-owned bank listed on
the Jakarta and Surabaya stock exchanges.

"BTN will also continue its functions, including serving as a
financing source for cheap and very cheap housing," he said.

Bank Rakyat Indonesia (BRI), which has the special mission of
providing loans to farmers and small companies, would remain
independent, he said.

"During the merger process and after the merger, rights of and
services to the public, particularly depositors, owners of any
kind of savings, and other third party rights, as well as
borrowings will be honored," Mar'ie said after meeting with
President Soeharto at his residence on Jl. Cendana, Central
Jakarta.

"The rights and obligations pertaining to foreign transactions
will be fully honored and executed in accordance with the
respective agreements," he said.

Minister/State Secretary Moerdiono, Governor of Bank Indonesia
J. Soedradjad Djiwandono, Minister of Industry and Trade Tunky
Ariwibowo, and Mar'ie reported to Soeharto on the government's
efforts to boost the ailing economy.

"The President fully approves this policy," said Moerdiono.

The new measure is believed to be a follow up to the
International Monetary Fund's (IMF) reform package to restore
confidence in the country's economy after the injection of a
US$23 billion multilateral financial aid package in October.

The government closed 16 ailing private banks early in
November as the first part of the new deregulatory measures in
the banking industry to support the IMF's bailout program.

The government will also allow foreign banks to become
shareholders in the yet to be named new bank which should be set
up by July, the minister said.

"We will begin to select foreign banks which have an
international reputation to become partners... to boost our
international credibility... as a part of our efforts to restore
international confidence in us," Mar'ie said.

He said the new bank would only be able to go international
after 2000.

The government has also decided to establish a credit
settlement company to settle the nonperforming loans of the
merged banks.

"However, the debt collection process will continue and law
enforcement will be fully executed," said Mar'ie.

BRI, which has a broad mandate to serve small entrepreneurs,
will maintain and continue its function and is expected to go
public before 2000.

According to the monthly Info Bank news magazine, Bapindo's
total assets as of June 1997 were Rp 13.99 trillion (about
US$2.69 billion); BBD's were Rp 25.57 trillion; Bank Exim, Rp
25.76 trillion; and BDN, Rp 32.60 trillion.

BNI's assets totaled Rp 37.99 trillion, BRI's were Rp 36.69
trillion, and BTN's were Rp 13.71 trillion.

Bapindo was rocked by a Rp 1.3 trillion loan scandal in 1994
(equal to $620 million at the time), which nearly sent the bank
into bankruptcy. It was saved by a fresh money injection from the
government.

When asked what would happen to the bank's employees -- about
87,000 people will be affected by the merger -- Moerdiono
answered: "The government always takes into account this problem.
I hope your reports will be proportional amid the sensitive
situation". (prb)

Economists -- Page 10