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)

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