Sunday, July 13, 2014

MALAYSIA:::Sarawak unions against mega bank merger

The argument that a few mega institutions will result in cheaper fees for consumers 
is a fallacy says union chief.
cimb_rhb_300KUCHING: The Sarawak Bank Employees Union (SBEU) and the Malaysian Trade Union Congress (MTUC) Sarawak Branch are against the proposed merger of CIMB, RHB Capital and the Malaysian Building Society Bhd (MBSB) to create an Islamic banking franchise.
The Unions called upon the Competitions Commission “to look into the adverse impact of the merger on competition”.

Topping the list of their concerns is that the merger would create a bank that would not be market-driven and was too big to fail. There would also be less competition, and the ‘small man’ would be left out besides the fact that the EPF (Employees  Provident Fund), a major shareholder in all three banks was being kept in the dark. Another concern was the potential for rampant loan sharking activities, among others.
“A too-big-to-fail bank can take greater risks and when loans go sour, the government will be forced to step in and bail it out to avoid economic disruptions,” said Andrew Lo, Chief Executive Officer for SBEU and Secretary for MTUC Sarawak in a statement.
“This would encourage the bank to continue to take greater risks in the belief that the government will bail it out.”
The costs to the taxpayer, pointed out Lo, would be significant and “all because someone wants to create value for shareholders only”.
Delving into recent history, Lo anguished over the fact that the last round of banking mergers, which resulted in the emergence of 10 large groups saw the disappearance of several household names in Sarawak.
“These included Kong Ming Bank, Wah Tat Bank, MUI Bank, Bank Utama, Delta Finance and Hock Hua Bank,” he said.
“They were small banks and like MBSB played a useful role in serving the small man and the rural people,” Lo stressed.
“Removing small banks will drive money-lending activities underground and an increase in loan shark activities,” warned Lo.
“At the same time, the big banks may be tempted to compromise integrity and ethics in their relentless drive for profits. They may manipulate interest rates and indulge in money laundering activities.”
He said the last round of bank mergers resulted in the closing of branches in small towns and the vacated premises being taken over by money lending outfits and credit companies.
“It’s easy to assume that a few mega institutions will lead to economies of scale and result in cheaper fees for consumers,” said Lo. “That has turned out to be a fallacy.”
“The banks charge fees for every transaction, the latest being 0.50 sen for each cheque issued.”
“The example of mega mergers in the plantation sector should be kept in mind as they resulted in the spectacular failure of Sime Darby.”

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