MEMORANDUM TO BANK NEGARA MALAYSIA
Read : A B
C D E
F G H
In a move that caught everyone by surprised, BNM
announced the accelerated merger programme (AMP) in which all the
Domestic Commercial Banks, Finance companies and the merchant banks
are to be merged into 6 Banking groups. The 6 anchor institution
groups are Mayban, BBMB/BOC, Public Bank Bhd, Southern Bank Perwira
Affin and Multi Purpose Bank. Eyebrows are raised over the choice of
the last three institutions as anchor banks.
FEBFI is of the view that the merger is the right
way forward, but we are extremely concern over the manner in which
it is done, especially that the mergers must be committed by end of
September 1999.
We must first state that contrary to the practice
of most Central Banks when implementing a major policy, there
appears to be no policy paper produced by BNM to justify the merger
plans. What we have is a few press statements in July and August by
the Governor. It is disappointing that the views of relevant
quarters were not even sought, much less discussed and debated
before announcing the AMP.
We submit this memorandum to BNM, The Minister of
Finance, Minister of Human Resources, The Prime Minister,
Association of Banks, Association of Finance Companies and BNM's
professional advisers, including Smith Solomon Barney.
We seek to convince the relevant authorities that
there is a need to review the merger plans in so far as to enable
all parties to expresses the views and that the interest of all
parties are taken into account, especially the Malaysian public. The
AMP needs to be carefully debated
As mentioned, the BNM did not produce formal
policy paper to clearly identify the rational behind the AMP. We can
only examine the reasons as contained in the press release dated 10
August 1999 entitled Tax incentives for Consolidation of Domestic
Banking institutions which is as far as possible quoted in toto.
We seek to address the following issues
A. COST SAVINGS & EFFICIENCY GAINS
B. GLOBALISATION
C. IS MALAYSIA OVER BANKED
D. ROLE OF SMALL BANKS
E. STABILITY OF THE FINANCIAL SYSTEM -BIG BANKS/SMALL BANKS
F. REDUCTION IN COMPETITION
G. HUMAN RESOURCES
H. CONCLUSIONS & RECOMMENDATIONS
We hope that BNM will take in account our views
and recommendations
ANDREW LO KIAN NYAN
GENERAL SECRETARY
12 September 1999
A COST
SAVINGS AND EFFICIENCY GAINS
1 The Governor of Bank
Negara Malaysia, Tan Sri Dato' Seri Ali Abul Hassan bin Sulaiman
today (10 August 1999) referred to his earlier statement on the
merger programme for domestic banking institutions announced on July
29, 1999 and emphasised that the merger exercise will not, in any
way, weaken the financial strength of the merged entities. In fact,
the creation of the six domestic financial groups will ensure that
the domestic banking institutions will be able to withstand
pressures and challenges arising from globalisation and from an
increasingly competitive global environment. This move towards
consolidation is in line with the Government's policy not to bail
out weak companies but to rationalise businesses towards higher
productivity. Business consolidation through merger is indeed a
common practice globally to achieve economies of scale and higher
productivity.
18 The merger is also
expected to bring about greater efficiency to banking operations.
The same extent of banking services can be provided to the whole
country at lower costs due to savings on manpower, information
system and reduction in branch network.
1. Evidence that bank mergers result in
efficiency gains is mixed and there is no clear link between bank
mergers and improved efficiency.
2. In a study of 9 US bank mergers, only 4
showed clear evidence of improvement in cost efficiency, despite
significant cost cutting Research had also showed that banks which
had undertaken mergers cut cost more slowly than banks which had
not been involved in mergers. This is blamed on the management of
the merger process getting in the way of cutting costs
3. Cost-savings resulting from bank mergers are
often confused with efficiency gains. Clear efficiency gains
should be demonstrated in any proposed merger.
4. Bigger does not necessarily mean better for
customers. There is some evidence that bigger banks mean bigger
fees and also customer service seems to drop away. In Australia
there is now a huge outcry that bank mergers means worse service.
The public outcry is so alarming that the Australian Bankers
Association has to pay off a popular radio talk show host AUD1.2
million to try to ward off criticisms.
5. 'Experience has shown…that while some
mergers may achieve significant cost-savings they are not
guaranteed and many mergers do not achieve them. It should also be
noted that mergers are not the only means of achieving such
savings. Others include outsourcing and joint ventures.' (Wallis
Inquiry)
6. Efficiencies resulting from bank mergers
and cost-savings resulting from mergers are two different
concepts. As pointed out by the Wallis Inquiry, efficiency effects
of a merger are typically measured by an expense ratio.
Cost-savings are measured only by reference to savings in gross
expenses. In terms of benefits to the community it is efficiency
gains which have the greatest implications for the real long-term
performance of the industry .
7. In mergers, cost-savings are relatively easy
to achieve e.g. folding together two IT systems. Efficiency gains
are more difficult and require extensive managerial skills.
Difficulties include management of different customer-bases,
blending differing cultures and the managerial quality of the new
institution.
8. 'For example, while an in-market merger is
bound to result in cost-savings when neighbouring branches are
closed down, this does not necessarily indicate improved
efficiency in the long-run. The point is, unless cost-savings
arise from improved institutional efficiency, the public may not
benefit from the merger and any improvement to the bottom line is
likely to be short lived'
9. Most empirical evidence is from the US.
Most of the US evidence is inconclusive. A paper on bank merger
performance published by the Board of Governors of the US
Federal Reserve concluded that after reviewing 39 studies on
post-merger performance:
'…the findings point to a lack of improvement in efficiency
or profitability as a result of bank mergers.'
'…efficiency indicators such as cost-to-asset and
cost-to-revenue ratios remain steady or actually
deteriorate.'
10. A 1992 study devoted to mega-mergers
published in the Federal Reserve Bank's Antitrust Bulletin
concluded that:
'…mega-mergers were not very successful on average in
improving cost efficiency in banking.'
11. The evidence is also mixed on whether bigger
banks actually bring benefits for customers. In terms of customer
service, smaller banks typically rank ahead of bigger banks, e.g.
the continual top customer service rating of Taranaki Savings
Bank. A survey of US banks released in August 1997 shows that
bigger banks charge significantly higher fees than their smaller
rivals.
12. We have a very good example in Malaysia
where, a Big international bank is charging RM50 for a
"marked cheque' while a small local bank is charging only
RM5- ten times more expensive. A Telegraphic Transfer to Singapore
cost only RM10.00 compared with RM25 for the big bank.
13. There is also no clear advantage when it
comes to cost to income ratio between big and small banks.
14. In Australia the Australian Consumers'
Association have claimed,
'Bigger should mean better and cheaper. But
after merging most of these banks have decided to take the money
and run. They're charging whatever they can get away with and
it's meant higher fees.'
'There is a very distinct price difference
between smaller banks and bigger banks and that distinction has
created an alternative in the US which also is distinct and no
longer exists here. And that is the majors versus the other
players which offer a different kind of competitive pressure,
not just based on service, relationships, accessibility, a whole
range of factors' .
15. It can be seen, therefore, that mergers
does not necessary bring about improvement in efficiency. Those
who asserted that there would be should demonstrate them, before
they are allowed to merge.
B
GLOBALISATION
2 In this time and age
of globalisation, banks must merge to survive the onslaught of
greater competition. The need to merge is even more imperative in
the face of increasing pressures under WTO for countries to open up
their financial markets to further entry of foreign banks. All
countries are now moving towards consolidating their banking system
and Malaysia cannot be the exception. In fact, Malaysia cannot be
seen to fall backward in the consolidation of the banking industry.
16. At the same time, the
merger allows for smaller financial institutions to participate in a
much larger banking group. To the extent all the six banking groups
are listed, anybody can buy bank shares from the market. The racial
issue should not arise at all. In the previous merger exercises
involving Kwong Yik Bank, Sime Bank and even Bumiputra Bank, no
issue was raised that it was racial. The same should apply now. What
is important is to ensure banking institutions will remain in the
hands of Malaysians, now and in the future.
1. Not all banks in Malaysia need to compete
globally. There is a role for small banks to operate, as seen in
many countries, including US, UK & Australia & CANADA. In
countries dominated by big players the government as allowed small
banks to operate, and provide a choice to customers.
2. One must however to be careful in being drawn
in nationalistic arguments. In Australia, there is the same
argument that Australian institutions need critical mass to avoid
being taken over by overseas groups . This is related to the
argument that mergers are necessary to create national champions,
an argument that has been noted as somewhat tenous
3. Even if all domestic banks are merged into
one big bank it is still tiny compared to the financial giants.
The total assets of local banks, amounting to RM352 Billion for
Commercial banks RM123B for F Co and RM39B for merchant banks are
negligible when compared with assets of the world biggest banks.
4. Therefore, merger as a defence against
foreign takeover is not supported by strong evidence. On the
contrary it will be easier for foreign banks to take over one big
merged bank than 6 to seven smaller banks. We are doing house
cleaning for the foreigners before they move in.
5. Instead of merging into one bank, the various
banks can be consolidated within a banking group with each able to
operate independently with its own markets (similar to Kwong Yik
and Maybank) this will generate internal competition, migration of
best practices and, provide the stability. It will reduced branch
closures and allow the group to reach out to and larger market and
cross segment.
6. This has worked out successfully in
Netherlands (Rabo Bank) and the credit unions in Canada.
We note that this appears to be the direction
envisage by BNM
C IS
MALAYSIA OVER BANKED?
5 With 71 banking
institutions prevailing in the country today, there are 2,712
branches located all over the country. There is clear view that
Malaysia is over-banked and some resources are wasted due to
duplication of branches in the same locality.
6 While the number of
banking institutions in Malaysia remains large, other countries have
succeeded in consolidating their domestic banks into a few large and
competitive banking groups. For instance, the United Kingdom has 4
major banking groups, Australia has 4 major banking groups and
Singapore has 5. In the case of Singapore, the Government intends to
reduce the number to even 2.
COUNTRY |
POPULATION |
NO OF BANK BR. |
BR/POP RATIO |
Malaysia |
20M |
2712 |
7374 |
Singapore |
3.2M |
450 |
7555 |
Australia |
18M |
6840 |
2631 |
New Zealand |
3.6M |
1404 |
2564 |
USA |
200M |
52941 |
5100 |
UK |
58M |
15675 |
3700 |
Canada |
30M |
9900 |
3030 |
1. From the above figures Malaysia have only
1.36 Bank Branch per 10,000 people, while Australian have 3.8, New
Zealand 3.6 Canada 3.3, UK 2.7 & USA 1.96. We have about the
same as Singapore. It must be noted that Singapore with a 100 %
urban population with a first class transport system has about the
same number of bank branch per 10,000 people when compared to
Malaysia with a large portion of its population in the rural
areas. We submit therefore that Malaysia is not over banked.
2. The argument that Malaysia is overbanked,
often used to justify the merger process, also does not hold water
given that historic profitability data indicates that the current
banking system is well matched to the country's credit allocation
needs.
3. The overall historic profitability of
Malaysia's banks as measured by the return on average assets is
spot-on regional averages. Interest margins at Malaysian banks
have also been broadly in line with regional averages In addition,
boosting the profitability levels of Malaysian banks was the fact
that the industry's operating costs were only about 70% of
regional averages.
7 The experience of
these countries has proved that consolidation in the financial
sector is both viable and desirable. The IMF too has forced
countries under their programmes (Indonesia, Thailand and S. Korea)
to reduce the number of banking institutions by effectively closing
them down.
8 Malaysia does not
believe that the IMF prescription of closing down the problem banks
is the way to go, as the social costs involved in terms of
dislocation of resources are high. A more reasonable approach
adopted by us is guided merger, with the Central Bank playing a
proactive role in solving the issues involved and the principle of
fairness will be strictly applied to all parties in the merger.
4. Branch closures due to mergers and branch
closures due to banks closing down have the same negative impact
and social cost to employees in terms of job security and to the
pubic in terms of accessibility to banking services, are no
different.
5. Contrary to the received wisdom bank branches
are not dead. A branch network is a key element in a successful
distribution strategy. Branches provide a valuable platform for
the distribution of bank products and services. Customers like
branches.
6. In an effort to cut costs banks run the risks
of closing too many branches and so cutting out the revenue
opportunities provided by these branches.
7. In New Zealand the issue of branch closures
periodically receives significant publicity, especially when the
'last' bank in the community closes. In some people's view a bank
branch does more than provide a financial service to a community;
it provides a status and stability to that community - hence the
hurt when the bank closes.
8. In Australia this issue receives far more
prominence than in New Zealand and significant community
opposition has been mounted in various communities (mainly rural),
around retaining branches. Arguably it was this sort of opposition
that frightened the Australian government from taking up the full
recommendations of the Wallis Inquiry.
9. While the debate still goes on about the
future of branch network most Australian and NZ; banks are now
committing to their branch network as part of their growth
strategy:
'The erroneous conclusions we have seen
recently about costs and efficiencies (from closing branches)
lead to similarly heroic assumptions about our need to slash
staff and branches'. (Don Argus, CEO, NAB)
'The branch network has a huge role in the
future as well as today'. (Don Mercer, CEO, ANZ)
10. Any merger will inevitably result in a net
reduction of branches. Our concern is that, in the drive to
quickly realise the costs of the purchase, a bank will close down
too many branches in order to show quick cost-saving returns.
These returns may have little to do with the longer-run
institutional efficiencies that any merger should be capable of
showing.
11. Branch overlap had surprising little
positive impact on increase efficiency due to mergers. Merged
banks with the greatest branch overlapped showed the least
positive gains.
D ROLE
OF SMALL BANKS
9 Without the merger,
the small non-Bumiputera financial institutions are likely to
disappear as a result of globalisation and increased competition.
There is actually no more place for family-run banks to survive in
the long run. It should be emphasised again that no small banking
institutions can survive once the financial market is opened up.
There is no place for family type of management in a modern economy,
especially in financial institutions.
1. The evidence is also mixed on whether bigger
banks actually bring benefits for customers. In terms of customer
service, smaller banks typically rank ahead of bigger banks, e.g.
the continual top customer service rating of Taranaki Savings
Bank. A survey of US banks released in August 1997 shows that
bigger banks charge significantly higher fees than their smaller
rivals .
2. The Australian Consumers' Association have
claimed:
'Bigger should mean better and cheaper. But
after merging most of these banks have decided to take the money
and run. They're charging whatever they can get away with and
it's meant higher fees.'
'There is a very distinct price difference
between smaller banks and bigger banks and that distinction has
created an alternative in the US which also is distinct and no
longer exists here. And that is the majors versus the other
players which offer a different kind of competitive pressure,
not just based on service, relationships, accessibility, a whole
range of factors' (supra)
3. Malaysia has a sizeable rural population and
different levels of development in different regions, especially
those in the east cost of Pen Malaysia and in Sabah and Sarawak.
There is still a need to have small banks that understand the
local conditions and able to serve the particular need of small
business and depositors.
4. 'Malaysia, with its wide variety of
industries with unique funding needs spread over a large
geographic area, would be better served by a mixture of small and
large banks allocating credit in a more efficient manner. It is
difficult to see how centrally determined credit and operational
policies can efficiently allocate credit throughout such a
disparate economy'' .
5. Already we have seen big foreign bank closing
down branches in small rural towns and move than to high-density
urban areas. If this goes on, very soon the rural rears will not
have any bank branches. This has happened in Australia where there
are only 4 big banks, plus the international banks that are
reluctant to invest in an extensive rural branch network.
6. In UK and US small banks are flourishing and
are offering a very important alternative to the bigger
international bank. Not all Malaysian Banks need to compete
globally. Bank of Granite, a small US bank with 12 branches and
US550M in assets is a case in point. .
7. Evidence in US also points to the fact that
small banks have a higher proportion of their assets in loans to
small businesses than larger banks.
8. In Malaysia the small and well-managed banks
and finance company are performing a very useful role and service
to the small bushiness and rural communities. Removing them will
encourage money lending to be driven underground and the increase
in loan sharks
9. By having just 6 big banks, the small
businesses and borrowers would be squeezed out of credit
facilities. Already, some big foreign banks in Malaysia have
policies of going up-market in their customer's base such as
credit cards holders, depositors and borrowers. Some banks are
offering minimal interest rates to small deposits as well as not
extending credit facilities or credit cards merchant arrangements
if their business volume is below a substantial level
10. Small business should not be confused with
the Small & Medium Scale Industries (SMI). SMI are much larger
industrial undertakings than the small traders, contractors,
retail outlets, small holders and farmers which provided crucial
services and employment to hundred of thousands of Malaysians.
E STABILITY
OF THE FINANCIAL SYSTEM -BIG BANKS/SMALL BANKS
12 It should be noted
that despite the progress achieved thus far in bank restructuring,
the non-performing loans (NPL) still remain large. For instance, on
the gross basis, the NPL of the banking system amounts to RM72
billion on 3-month basis and RM53 billion on 6-month basis. The
portion for finance companies is RM20 billion and RM14 billion
respectively. Without comprehensive merger, it is possible these NPL
could threaten the stability of the banking system in the future,
with the smaller financial institutions dragging down the bigger
ones.
13 The problems faced
by smaller financial institutions have appeared to be relatively
predictable. Due to their inefficiency, they tend to offer higher
interest rates and compete aggressively for deposits. They tend to
price their loans higher to pay for higher deposit rates and get
high- risk borrowers because good borrowers go to bigger and
stronger institutions with lower lending rates. In the end, whenever
economic problems set in, the small institutions get hit first. This
was what happened to DTCs and finance companies in the past, and is
threatening to bring down smaller banks now. The only viable
solution is for a merger which removes smaller financial
institutions from the market.
15 ……the cost of
bailing out banking institutions in the future will be even higher
without the merger. The recent bank restructuring exercise has cost
the Government about RM60 billion In addition, the Government had to
spend RM2 billion to rescue Deposit Taking Cooperatives (DTCs) in
the 1980s. It is difficult to envisage that the Government will
continue to be rescuer of banking institutions in the future as the
risks are likely to be higher and amount of funds involved, larger.
1. Danamodal figures showed that the financial
institutions require recapitalisation by Danamodal . are the big
and medium size banks and finance companies. Out of a total of 6,2
Billion, 4.6 Billion went into the Arab Malaysian Banking Group,
RHB and MBf Finance. Non of the small family owned bank require
any capitalisation and their performance are far better than the
big banks.
2. Further Malaysia's second biggest bank, Bank
Bumiputera needs to be rescued twice while the biggest Finance
Company MBf finance has to be placed under BNM control.
3. "Underlying the Malaysian Central
Bank's initiative is the belief that larger banks are stronger.
However, most of the system's smaller banks - whom this exercise
is designed to eliminate - have come through this and previous
downturns in the best shape. Contrary to expectations, many of
Malaysia's smaller banks have emerged relatively unscathed from
the regional crisis while many of the larger players were hit
badly".
4. One must appreciate that a big bank may be
too big to fall and the cost to rescue it will be much higher. The
LTCB failure in Japan is a case in point.
5. Large banks with major market share can
become too big to fail, and the government may be forced to bail
them out to avoid consequent economic disruptions and the cost to
taxpayers will be significant. Such big banks might be even
encouraged to take greater risk, knowing that the government would
be likely to bail it out.
6. The consequences of a big bank failure are
much greater. This is because the individual banks, being bigger,
are more likely to have significant exposures to each other, so
that the failure of one bank might render the other banks also
insolvent (as a result of their inability to recover inter-bank
advances. Where banks are small this will be less of a problem.
The problem is compounded if there are only a few big banks in the
country, as it would mean that all the banks will have more
exposures to each other
7. What prevents bank failures depend on
management ability and the competent supervision by the
authorities, and as seen in a lot of countries- the prevention of
political interference in granting of loans. Size is hardly an
indicator of stability of a bank. Even if the chances of a big
bank failure are less, the consequence of a failure will be more
damaging than a small bank
8. Management skills and competency and
integrity transparency are more crucial factors in determining the
stability of the banking system.
9. Therefore there is little empirical evidence
to support the solution to remove all the small banks from the
market.
F
REDUCTION IN COMPETITION
1. Mergers will result in a significant
reduction in the number of effective competitors in the Financial
sector in Malaysia especially to small business and depositors.
2. The area of greatest concern is small
business lending. In New Zealand, where three are only 4 big
banks, these banks are choosing not to compete in this area.
3. It is not unreasonable to conclude that
increase concentration of a few banks in Malaysia might allow bank
to increase their profit margins and increase the cost of
financial services for bank customers.
4. In Australia, the big 4 banks have continued
to increase their fees for financial services. In commenting on
this round of increases one analyst stated;
'In line with most banks' strategies they are
targeting the customers they want - the others can go to hell. It
recognises that growth for growth's sake is not the way to deliver
profits'
5. He further noted that the strategy was risky
because judgements had to be made about unprofitable customers who
might become profitable in future. These comments apply equally to
New Zealand.
6. It is easy therefore to predict that fees in
New Zealand will steadily increase. Firstly, to continue the move
of unprofitable customers out of branches and secondly, to begin
to recover the real costs of the transactions and services.
Differential pricing in favour of electronic transactions will be
used to move customers out of branches. Then the banks will slowly
increase the fees attached to electronic transactions. As long as
all banks do this - move fees upwards together - then customers
are left with little or no choice. Such a situation will rise in
Malaysia if there are only 6 big banks.
7. We argue that banks occupy a special place in
the economy. Industries that provide essential services and are
dominated by a few large players tend to marginalise significant
groups of consumers. This remains true even where there is a high
level of competition - the industry targets only the profitable
segments of the market, takes profit where it can, and engages in
predatory pricing only where and when a new competitor emerges.
Good examples are telecommunications and electricity.
G HUMAN
RESOURCES
14 In order to minimise
the difficulties involved, particularly to those employed in the
industry, an attractive separation scheme can be devised where the
costs are borne by the merged entities. The Government could assist
by giving some tax incentives to smoothen the merger process…
19. ……In fact, the
decision to hasten this merger programme is inevitable given the
present increasingly competitive and globalised business
environment. There is a pressing need now to push and accelerate the
consolidation and merger process to prepare the domestic banking
institutions to face the inevitable opening up of the banking sector
to foreign participation. However, Bank Negara Malaysia is
discussing with the merging banks to ensure retrenchment, if any, is
minimised through redeployment. With the growth expected in the
economy the expanded banking services may be able to retain a
sizeable portion of the staff after rationalisation together with
new job opportunities arising from the development of the domestic
bond market. Even in the cases of retrenchment, appropriate
compensation will be given to those affected.
1. Despite assurances by Ministers that
redundancies would be managed through voluntary separation
schemes, 400 employees of Amanah finance are already retrenched
and BNM ignore our appeals. The package for the forced
retrenchment offered is even worse than the Voluntary scheme
offered by other banks & Finance company
2. BNM must ensure that the management accorded
recognition to those merger entities to unions to represent
employees, including executives. The acquiring partners must be
compelled to absorb all staff of the acquired party with no loss
adverse change in the terms and conditions of employment. Any
redundancies must be addressed by Voluntary Separation Scheme.
3. The time frame of the mergers must be
stretched to allow the market to absorb the retrenched staff. The
expected growth and the domestic bond market will not take off
immediately; the merger must therefore be staggered to minimise
the impact.
4. It must be remembered that in Malaysia we do
not have employment benefit unlike countries like UK and Australia
when more than 4000 bank and building societies closed and 130,000
jobs have been lost in UK and 40,000 in Australia since 1990,
principally as a result of mergers.
5. We welcomed the assurances by the Governor on
9 September 1999 that there will be no retrenchments even after
the merger exercise. We will continue to monitor the situation
very closely
H
CONCLUSIONS/RECOMMENDATIONS
11 It is also ironic that
some analysts appear to question the motives of the merger, when
they themselves were accusing Malaysia for not moving fast enough on
the merger programme before. When good progress in bank
restructuring through Danamodal, Danaharta and CDRC was evident
early this year, most analysts changed their views of Malaysia for
the better. However, the nagging issues raised were the lack of
progress on bank merger. Now that Malaysia moves ahead with the
merger, a few seem to doubt our intention. In fact, the need for
rapid and major merger programme has also been one of the advice
given by our professional advisers, including Smith Solomon Barney.
FEBFI accepts that mergers is the way ahead but
given the numerous issues that need to be addressed, and it is still
debatable what are the real benefits of mergers, we are urging BNM
to tread carefully or we will play into the hands of the foreigners.
We submit that the accelerated merger plans be
reviewed as follows:
1. Time frame to be stretch- to allow the
employment markets to absorb the redundant staff as well as for
the public to better integrate with the merged banks.
2. A group should be merged first and the
effects to be scrutinized and study and the lessons learned will
benefit the next mergers. Prospective anchor groups must bid for
the right to be anchor groups and they must demonstrated the
ability to lead and managed a merger to a successful conclusion
and to achieve the objectives et out in the merger
3. A select number of small banks be allowed to
continue to be independent. The selection must be based on
geographical location of branch networks and track record
4. There must be conditions on branch closures-
public access to branch network must not be taken away. Access to
bank accounts and affordable financial products are basic
necessities
5. Human Resource issues must be resolved with
the involvement of all parties especially with the unions. Union
recognition is a prerequisite for a meaningful discussion and
dialogue. There must be a guarantee of no retrenchment but VSS
6. There must be a strong emphasis on management
ability and competencies. There must be a clear post merger
strategy. What is needed is professional management, greater
transparency and no undue and unwanted pressures on the banks; be
it to grant more loans to the stock market, or to merge; to propel
the Malaysian Banking Industry into the new millenium. Political
interference in credit decisions and management must be removed.
7. Mergers will only work if there is
meaningful, thorough and transparent consultations with all
affected groups. There must be public and meaningful inquiry.
Failure to review mergers publicly and openly would tend to
aggravate public concerns over whether they were getting a fair
deal from banks.
8. Take-overs and mergers need to meet a test of
wider public interest - including customer service and community
needs.
9. It is easy to assume that mergers should be a
good thing. It has been said about the Australia financial market:
"the replacement of many competing
institutions by a few mega- institutions will lead to economies
of scale that should result in cheaper fees for Australians .
This has turn out to be fallacy.
10. Lastly to quote Dato Seri Mahattir Mohammed,
our Prime Minister who was commenting on the national economic
recovery:
. "There is no quick fix and the
government is realistic enough not to expect them."
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