Malaysian throws wrench in banking merger plan

Malaysian throws wrench in banking merger plan

KUALA LUMPUR (AFP): In another apparent rebuff to the central bank, Prime Minister Mahathir Mohamad Tuesday again softened its draconian plan to integrate Malaysia's 58 financial institutions under six banks.

Mahathir said the government was not in a hurry to push banks to merge and merger partners would now be allowed to select anchor banks among themselves.

An opposition leader and some analysts said Mahathir's modification of Bank Negara Malaysia's original merger plan was aimed at pleasing voters ahead of a general election due next June but expected as early as next month.

Mahathir was quoted as saying by the state Bernama news agency that the government was not rigid on the number of anchor or core banks but "six is possible if everyone agrees."

"We are not in a hurry although unsolicited foreign advisers have urged us to do it quickly," he said, adding he hoped the banks "will decide as soon as possible" which among them would become the anchor banks.

It was the third time in a week that the premier had questioned the central bank plan to merge financial institutions into six groups.

The plan is set to be completed by next March 2000 under the original timetable and the central bank said all institutions met a Sept. 30 deadline to sign in-principle agreements.

But Mahathir announced last Wednesday the program may be revised amid merger difficulties. On Saturday, he said the exercise should not be too rigid and he expected Bank Negara to toe the government's line.

Mahathir said Tuesday the National Economic Action Council, charged with overseeing economic recovery, decided to review the program following objections to the central bank's decision to restrict the number of core banks to six and to nominate the six core banks.

He said authorities originally decided on the six banks to evoke a response from the banking community and wake them up to the need for mergers to prepare for competition from foreign counterparts when the market was opened further.

The six core banks identified earlier were Malayan Banking, Multi Purpose Bank, Bumiputra-Commerce Bank, Perwira Affin Bank, Public Bank and Southern Bank.

In a statement, opposition lawmaker Lim Kit Siang welcomed Mahathir's latest remarks which he said had temporarily broken the "stalemate" due to Bank Negara's "arbitrary, high-handed and autocratic" merger plan.

But Lim charged that Mahathir had intervened as he was worried about "alienating significant sections of the Malaysian society" before an impending poll.