KUCHING: The scrapping of the proposed merger between CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd to create Malaysia’s largest bank has been greeted with relief by the Sarawak Bank Employees Union (SBEU).
SBEU chief executive Andrew Lo said the union was never convinced that that the merger would create value for all stakeholders or that potential synergies could be realistically delivered.
“We must not forget that banks are more than simply shareholder value. Banks provide an essential service, play a critical part of the economy and have varied stakeholders – customers, borrowers, depositors and staff.
“It is convenient to blame the changing economic landscape but even in the best of times, 86% of the synergies would come from cost-cutting, closing down branches and retrenching staff, not through operation efficiency and value creation,” he said in a statement.
Lo said the potential merger would have reduced competition and access to credit for small businesses and ordinary folk.
He called on the Malaysian Competition Commission to ensure that such mergers would not be detrimental to consumers and the economy at large.
He also urged Bank Negara to undertake an independent study on the impact of bank consolidation under the financial masterplan on banking charges and access to consumer credit.
“We have seen the mushrooming of moneylenders and credit companies, some even occupying former bank branch premises, creating a shadow banking system that is unregulated,” he said.
In addition, Lo said the proposed merger would have created a bank juggernaut which was slow to respond in a changing landscape and resulted in a bank that was too big to fail.
“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 disruption.
“This in turn encourages the bank to continue to take greater risks in the belief that the government will bail it out.”
He urged the banking sector to focus on enhancing individual bank franchises, growing their business, generating attractive returns for shareholders, treating employees with respect and serving Malaysian customers and the economy well instead of relying on quick-fix solutions.