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)