Onus on Bank Negara Governor  to prove that his  dictat on forced bank mergers on July 29 did not have political and other agendas as two weeks earlier he was satisfied with progress of bank mergers

Media Statement
by Lim Kit Siang 

(Petaling Jaya, Sunday): The Bank Negara Governor, Tan Sri Ali Abul Hassan, has not been able to answer questions as to the reason for the sudden urgency for the Bank Negara to issue a  dictat to force bank mergers of 21 commercial banks, 25 finance companies and 12 merchant banks into six banking groups, with preliminary merger agreements signed by all financial  groups by the end of September, when two weeks earlier, he was quite satisfied with the progress of the bank merger process.

The onus is therefore on the Bank Negara Governor to prove that his dictat on forced bank mergers on July 29, 1999 did not have political and other agendas when on July 14, 1999, in a statement on "Progress of Banking Sector Restructuring",  Ali said:

Ali concluded his statement on a very upbeat note, stating that the various efforts undertaken by the Government to restructure the banking system "have begun to yield positive results" and expressing his confidence that "the banking sector should emerge stronger and more resilient to meet the challenges in the years ahead".

However, two weeks later, Ali took a somersault and summoned  major shareholders of domestic commercial banks to his office to express his displeasure at the "dismal" result of the merger pace, issuing a diktat that all the financial institutions must be forced into "shot-gun" marriages into six banking groups led by six anchor banks.

This raises the question whether the Bank Negara Governor was acting professionally and had the authority of the independence of his office from any form of political pressure, when within two weeks, he could take such a dramatic somersault in his position on bank mergers.

Ali should act with greater openness and transparency as his flip-flop on the bank merger issue in a matter of two weeks has sent out very negative signals to investors that the Malaysian authorities have no respect whatsoever for the right of minority shareholders.

The Bank Negara Governor should explain the criteria for the selection of the six anchor banks and the decision that the domestic financial sector should be reduced to six core groups, when only last October, Parliament was informed that the government had decided that eight financially strong local banks capable of competing in the international arena would emerge from the merger process.

What is the rationale for the slashing of eight domestic banking groups to six in a matter of less than a year?


*Lim Kit Siang - Malaysian Parliamentary Opposition Leader, Democratic Action Party Secretary-General & Member of Parliament for Tanjong