Preferential treatment in bank merger?

There are two reasons why Bank Ekspor Impor Indonesia (Bank Exim) can be regarded as privileged. First, despite its financial difficulties, the bank has been granted additional capital to the tune of Rp 20 trillion in Bank Indonesia liquidity support. Second, Bank Exim is being lined up to become the parent bank in the planned merger of four state banks -- BBD, Bapindo, BDN and Bank Exim. The new bank will be known as Bank Mandiri.

This has caused envy and attracted criticism that the government is treating other banks unfairly. Fortunately, the government has announced that the decision is not final and that it is still considering the matter.

The government needs to carefully reconsider which of the ailing banks it is going to allow to survive and eventually acquire other private banks. If inefficient banks are selected, the public's trust in the banks born of mergers will naturally also be deficient.

Bank Exim, for example, which is currently under the care of the Indonesian Bank Restructuring Agency (IBRA), will need a relatively long time to win back trust, especially abroad. Another point the government needs to consider in case it should decide to press ahead with its plans as they currently stand concerns the matter of overseas representative offices, for example in the United States. Bank Exim's U.S. office has been closed, which will make it rather complicated for Bank Mandiri to open an office in that country, especially since the U.S. central bank closed the door to Indonesian banks in 1991.

The merger of four banks with differing customs and histories is not an easy task to accomplish. A wrong step could have disastrous consequences.

-- Bisnis Indonesia, Jakarta