BOMBSHELL – MALAYSIAN BANKS TO BE PUSHED INTO FRESH ROUND OF MERGERS BY NEW GOVT? EVEN BEFORE CABINET IS PICKED, ‘HUDUD HADI’ & CO – PERHAPS EYEING THE FINANCE MINISTER POST IF THEY DON’T GET DPM – START POKING THEIR NOSES INTO BANKING SECTOR

PETALING JAYA: PAS has called for a fresh round of bank mergers due to the current tightness in the liquidity of the financial system.

In a statement, the Islamist party’s central economic, real estate and entrepreneur development committee vice-chairman Mazli Noor said an industry-wide merger should be considered immediately given the most recent cut in overnight policy rate (OPR) by 25 basis points to 2.50%, the lowest in 10 years.

“Analysts in general are anticipating a marked impact on the banking sector’s earnings and net interest margins, with Nomura Asset Management Malaysia, for example, anticipating a shrink in net interest margins of between 2% and 3%, lowering earning between 1% to 2%,” he said.

He said while borrowers would benefit from the lower OPR, banks would find it harder to attract new deposits and increase their finances.

An industry-wide merger could see the merged entities achieve economies of scale, stabilise the industry and protect consumers, he said.

Merged entities would also increase their ability to compete both locally and abroad, he added.

“It is imperative for the federal government to facilitate the necessary discussions between the banks themselves, both in terms of matching potential parties and providing the appropriate incentives.”

He said in the longer run, such mergers would see a rationalisation of costs across the board and a lowering of risks associated with non-performing loans.

These mergers, he added, could be expanded across the region as local giants like Maybank, CIMB Bank and Public Bank have done.

“The generally larger regional market base would allow for greater adjustments across a more diverse income stream, and improve cashflow recovery.”

He added that any effort must begin with a complete rethink of the financial industry’s ability to compete in the face of global pressures.

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