IBRA to discuss bank merger plan with House amid protests

IBRA to discuss bank merger plan with House amid protests

Dadan Wijaksana, The Jakarta Post, Jakarta

The Indonesian Bank Restructuring Agency (IBRA) will consult with
the House of Representatives over a plan to merge five banks,
including the fate of thousands of employees who may have to be
laid off, according to a senior agency official.

IBRA deputy chairman for bank restructuring I Nyoman Sender
said on Friday that the agency would take into consideration the
aspirations of the bank employees.

"IBRA will take into consideration the employees' wishes, but
we cannot just accept them like that as everything related to the
merger plan must first be discussed with the House," Sender said,
adding that the next talks were slated for Monday.

He was speaking to reporters after meeting representatives of
the employees, who had staged a demonstration at IBRA
headquarters. Some 500 protesting employees demanded that the
agency allow the workers' unions to participate in finalizing the
merger policy in the hope of securing better severance packages.

IBRA plans to merge four weak banks with Bank Bali. The banks
involved are Bank Universal, Bank Patriot, Bank Artha Media and
Bank Prima Express and the merger is scheduled to take place next
month as part of the government's bank restructuring program.

The agency announced on Thursday that the merger process could
cost around 2,350 jobs, although IBRA officials said that this
was not a definitive figure.

IBRA has said the merger process is expected to cost Rp 4.6
trillion (US$500 million), including some Rp 159 billion for
severance packages for the laid-off employees.

The merger of the five banks is already running behind
schedule. A further delay will only increase the cost of
financing the merger further as the financial condition of the
banks would likely worsen. Out of the five banks, only Bank Bali
has a capital adequacy ratio (CAR) of above the central bank's
minimum CAR requirement of 8 percent.

The government has to inject more than Rp 4 trillion to boost
the CAR of Bank Bali after it merges with the other four banks.
The initial cost of recapitalizing the bank was set at Rp 3.9
trillion.

The five banks are among 11 banks under the control of IBRA,
which has the responsibility of restructuring the country's
banking industry, which was badly hit by the late 1990s financial
crisis.

Should the agency fail to accommodate the wishes of the
employees of the banks, the protests could continue thus posing a
potential obstacle for the merger process.

But it will be difficult for the cash-strapped government to
provide a generous severance packages.

IBRA has said that it had already allocated the necessary
funds for the merger plan. Part of these funds will take the form
of bonds it has redeemed from recapitalized banks, while the
remainder will be in the form of cash obtained from the sale of
various assets.

Elsewhere, Faisal Baasir, deputy chairman of House Commission
IX on banking and financial affairs, also acknowledged the
employees' demands, saying that the commission will convey them
to the agency at Monday's hearing.

"We'll discuss this with IBRA. Basically, from the House's
point of view, the merger plan should neither cause suffering to
the employees or impose additional burdens on the state," Faisal
told The Jakarta Post.

Faisal added that if the lay-offs were to happen, they should
be effected under the prevailing regulations.