Central bank softens merger terms
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Central bank softens merger terms

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Malaysian banks are still being forced to merge but the terms are less Draconian following a softening of the authorities' stance.

Back in July, the central bank Bank Negara issued an edict instructing the country's 55 financial institutions - 20 commercial banks, 23 finance companies and 12 merchant banks - to merge into six core groups by April next year. The decree was designed to turn up the heat in a bid to ensure the industry got its act together in the face of global competition.

The howls of protest reverberated from every corner - indignant shareholders, bank executives, employees and economists. Even prime minister Mahathir Mohamad called for more flexibility. Three months on, the central bank has eased its position. Banks are now allowed to choose their own partners, rather than be forced under the wings of six designated anchor banks; the number of merged groups is no longer confined to six; and the timeframe has been extended.

The consensus is that eight or nine merged groups are likely to emerge from the revised programme.

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