One-stop service for bank mergers to be established

One-stop service for bank mergers to be established

JAKARTA (JP): A one stop service center will soon be
established to assist banks merge and meet the new minimum
capital requirement, a government official said yesterday.

Director General of Tax Fuad Bawazier said yesterday that
banks planning to merge could request free assistance from the
center to help arrange the permits required from various
government offices.

Fuad, who has been tipped as the next finance minister, also
said that the center can help appoint accountants and appraisal
companies for the merger process.

"The idea for the center came from members of Perbanas," he
told journalists following a two-hour gathering with central bank
directors, key officials from Indonesia's private banks
association (Perbanas) and government officials.

Chairman of Perbanas, A. Subowo, said that at least 35 of the
184 banks affiliated to the association had stated an intended to
merge. He did not provide further details.

Bank Indonesia has set a tough minimum capital requirement for
private banks. A minimum of Rp 1 trillion in paid-up capital must
be held by the end of this year. The minimum capital requirement
will rise to Rp 2 trillion by the end of 2000 and to Rp 3
trillion by the end of 2003.

Previously, capital requirements were Rp 150 billion for
foreign exchange banks and Rp 50 billion for non-foreign exchange
banks.

The central bank expects those banks which do not fulfill the
requirement alone to merge with other domestic banks or invite
foreign investors.

Fuad confirmed that two overseas banks had expressed an
interest in acquiring domestic banks but he declined to
elaborate.

However, he said that domestic banks had realized the wisdom
of merging, because banks will need strong capital, and good
management and technology to survive in the global era.

"Even banks which already have more than Rp 1 trillion in
paid-up capital have stated plans to merge," he said.

Fuad arranged yesterday's gathering in his capacity as an
official in the economic and finance resilience council, which
was formed by President Soeharto to deal with the country's
economic crisis.

The crisis, which began last August, has highlighted the
importance of consolidating the country's banks, who are plagued
by mounting bad debts, poor capital and weak management.

Indonesia has 212 commercial banks, only 10 of which have more
than Rp 1 trillion in paid-up capital.

Analysts said that banks which currently hold paid-up capital
of more than Rp 800 billion might not opt for merger in order to
meet the new capital requirement, but instead seek foreign
investment.

The majority of Indonesia's banks have capital below Rp 500
billion, meaning that to meet the capital requirement, five or
six banks will have to merge.

Analysts said that a major problem with the ambitious merger
plans was finding suitable merger partners because of the limited
number of healthy banks.

Several banks, mostly from the same business groups, have
signed MOUs to embark on a merger process, including banks under
the BNDI Bank with Bank Internasional Indonesia; and banks from
the diversified Bakrie Group. (08)