[ Laman Ehwal Semasa ReformIS ]
Date: 07 Aug 1999
Time: 07:14:45
Remote User: -
Malaysian opposition wants review of banking merger plan
KUALA LUMPUR, Aug 7 (AFP) - A Malaysian opposition party Saturday called for a review of a sweeping banking merger ordered by the central bank to consolidate dozens of financial institutions into six groups. The Democratic Action Party welcomed the consolidation of the banking industry but voiced concern that "strong-armed pressures by Bank Negara Malaysia to create forced marriages might cause more harm than good".
"The proper role of the government is to set rules and regulations for the orderly functioning of the financial institutions rather than be the matchmaker for their mergers," said its secretary-general Lim Kit Siang.
"Bank Negara should concentrate on supervising the financial institutions to prevent them from straying into massive losses."
Lim, who is a lawmaker, said the country's recession last year had shown that big financial institutions were the major failures, forcing the government to step in and bail them out.
"We object to forcing efficient small banks and finance companies to be merged with existing bigger entities, as bigness is not necessarily good and there is a niche for the so-called small or boutique banks.
"While a bigger entity has an advantage in absorbing the shocks of turbulence, finally it is quality management, not just the size, that counts," he added.
The party urged authorities to ensure that the proposed banking consolidation would "rescue the sick and not victimise the healthy".
Bank Negara announced the merger plan last week, saying each of the proposed groups would be based around a commercial bank, a merchant bank and a finance company and that all banks would have to sign memorandums of understanding by the end of September.
Analysts have said the plan appeared unrealistic and that it may lead to new problems such as massive lay-offs and possible lending curbs.
International credit rating agency Moody's Investors Service also warned earlier in the week the merger proposal would be complicated and inevitably delayed by "political considerations."
But Prime Minister Mahathir Mohamad defended the plan Friday, saying it was necessary to consolidate local banks to allow them to compete successfully with their foreign counterparts.